What is the difference between APR and EAR?

APR stands for annual percentage rate, while EAR stands for effective percentage rate of active APR. APR is the simple interest rate per year, while EAR is the compound interest rate plus a fee calculated across a year.

APR is calculated as the rate for the payment period, multiplied by the number of payment periods in a year. The chief meaning of EAR may encompass variations in each given jurisdiction, depending on the type of fees that might be relevant, such as monthly service charges, participation fees, or originating loan fees.

APR is not as mathematically precise as an EAR. However, at the same percentage rate, APR gives marginally better returns than EAR with factors being constant.

APR and EAR are two types of interest rates. APR stands for annual percentage rates. It is above simple interest and can tell the borrower the true amount they are borrowing. EAR stands for an effective annual percentage rate. This rate calculates the full amount of the interest, along with any other additional interest on top of that. Both of these interest rates can be used for load rates. APR does not show any loan fees. EAR does, so if a person is using APR, they should ask about any additional fees. Both types of interest rates have their own way of calculating the rate.