Why Two Personal Loan Offers With the Same Rate Can Cost Differently
An origination fee — a percentage deducted from the loan proceeds upfront — reduces the actual cash received while the full loan amount still accrues interest, effectively raising the true cost above the stated interest rate. Comparing the APR (which factors in fees) rather than just the interest rate is the reliable way to compare two offers fairly.
Two loans advertising the identical interest rate can have meaningfully different real costs, and the origination fee is almost always the reason why.
How an origination fee changes the real cost
A $10,000 loan with a 3% origination fee only disburses $9,700 to the borrower, while the full $10,000 still accrues interest and needs to be repaid — meaning the borrower is effectively paying interest on $300 they never actually received, which raises the true cost beyond what the stated interest rate alone implies.
Why APR, not interest rate, is the fair comparison
APR (Annual Percentage Rate) is specifically designed to fold origination fees and other loan costs into a single comparable figure — two loans with the identical interest rate but different origination fees will have different APRs, and comparing APR directly is a more reliable way to identify the genuinely cheaper offer.