APR vs. Interest Rate vs. Comparison Rate: What's the Difference?

APR, interest rate and comparison rate all describe the cost of borrowing, but they are not the same number and Australia does not actually use all three. Here is the short version: the interest rate is the raw cost of borrowing; the comparison rate is Australia's standard way of adding most fees to that rate; and APR is the US/UK equivalent of the comparison rate, not a figure you will see on an Australian loan contract.

Interest rate: the raw cost of borrowing

The interest rate is the percentage a lender charges you each year on the amount you still owe. It does not include fees. A loan advertised at 6.50% p.a. interest can still carry an establishment fee, a monthly account fee, or other charges sitting outside that headline number.

Comparison rate: Australia's standard

The comparison rate is what Australian lenders are required to show alongside the interest rate on most consumer credit advertising. It blends the interest rate with most standard fees into one annual percentage, so two loans with different fee structures can be compared more fairly. It is not a perfect number - it excludes some fees and is based on an example loan amount and term - but it is the closest thing Australia has to a single "true cost" figure.

For the full breakdown of what a comparison rate includes and leaves out, see our complete guide to comparison rates.

APR: the US/UK equivalent

APR (Annual Percentage Rate) does the same basic job as a comparison rate - folding interest and some fees into one annual figure - but it is calculated differently and used in different countries, mainly the United States and United Kingdom. Australian consumer credit law does not require an APR disclosure; it requires a comparison rate instead. If you see "APR" used on an Australian site or in imported loan software, treat it as informal shorthand for the same idea, not a distinct legal figure you are entitled to under Australian law.

Quick comparison

What about business finance?

None of these three figures reliably apply to business lending. The comparison rate requirement under the National Credit Code covers credit taken out mainly for personal, domestic or household purposes - not business loans or equipment finance. That is why comparing commercial finance means looking at the interest rate, every fee, the total amount payable and any balloon payment together, rather than relying on a single headline percentage.

The takeaway

In Australia, ignore APR - it is not the figure your lender is required to give you. For personal and consumer credit, use the comparison rate as your starting point, then check what it leaves out. For business finance, skip the search for a single rate altogether and compare the full loan structure instead. If you would rather have someone else do that comparison, loan-o will review any finance offer for free, before you sign.

Finance is subject to lender approval, lending criteria, terms, conditions, fees and charges. The information in this article is general and does not take into account your personal or business needs.

Last reviewed: 1 September 2026. This article was prepared using information available from the Australian Securities and Investments Commission, Moneysmart, and the National Consumer Credit Protection Act 2009. This content provides general information only. It should not be treated as personal financial, tax, legal or credit advice.