What Is the Difference Between a Finance Charge and annual percentage rate?

A finance charge refers to the total cost of borrowing, including interest and any associated fees, expressed as a dollar amount. In contrast, the annual percentage rate (APR) is a percentage that represents the yearly cost of borrowing, taking into account the finance charge along with any additional fees, normalized over a year. While the finance charge gives a clear dollar figure, the APR provides a standardized way to compare different loan offers by expressing costs as a percentage of the loan amount over a year.