Answer:
The interest rate is the cost you pay to take out a loan, and is calculated as a percentage of your base loan amount. Interest rates are determined by lender during the underwriting process, and oftentimes are directly correlated to the strength of the applicants credit score. The stronger your credit is, the more likely you will receive a favorable interest rate.
The interest rate and additional lender fees are often combined into one rate known as the Annual Percentage Rate (or APR). By looking at the APR, you can get a good understanding of how much you’ll pay for the loan, and help you budget for your monthly loan payments.