Annual percentage rate, or APR, goes a step beyond simple interest by telling you the true cost of borrowing money. For example, the APR you receive when you buy a house takes into account the fees you pay to originate the loan, as well as the interest you’ll pay. However, APR doesn’t include the effects of compound interest.
On the other hand, effective annual percentage rate, also known as EAR, EAPR, or annual percentage yield (APY), takes the effects of compound interest into account.