APR is the true rate of interest on a loan. If you borrow €100 and pay €12 interest at the end of the year, the APR is 12%. Example You borrow €100,000 from a bank. The rate of interest is 3% calculated monthly. 3% is €3000 One month’s interest is €250 ( 3000/12) At the end of January you will owe €100,250 In February, you will be charged interest on the €250 as well as on the €100,000. So February’s interest is €250.625 At the end of the year, you will owe €3040 interest so the APR is 3.04% If the interest is calculated daily instead of monthly, you will owe €3045 interest. With interest rates at 3%, there is very little difference between flat rates and APR. And it doesn’t matter much if they charge it daily or monthly. But a 10% flat rate charged monthly is 10.47% and 10.5% if charged daily. Why do lenders with the same APRs have different cost per thousand? The APR must also include any charges which the lender imposes, so there may be additional charges. Of course, one lender might be miscalculating the APR. Another thing to watch out for is term of the loan. A 30 year loan at 3% will have a lower cost per thousand as a 20 year loan at 3%. So should I focus on cost per thousand? No. Consider both. The cost per thousand will tell you what your repayments will be in hard cash every month. This will vary depending on the term of the loan. As the cost per thousand includes an element of capital repayment, it is not the true “cost”. The true cost is the interest element. The APR will tell you the true cost and will allow you compare loans over different terms.