leaning

Interest Rate vs. APR: What’s the Difference?

When you find yourself applying for a student loan, two terms you’re guaranteed to come across are “interest rate” and “annual percentage rate” (APR). And if you’re new to the world of finance, you’ll also find yourself wondering what on Earth they mean and what their significance is for you. Fortunately, we’re not about to let you go at this alone. Below, we’ve got a quick run-through of interest rate vs. APR, how they can impact your decision to take out a particular type of student loan, and how much you will be paying for over the course of your student loan term length.

What's an interest rate?

Essentially, the interest rate is the amount you’re being charged to borrow money. At the beginning of a loan, you borrow a certain amount — this is called the loan principal.  An interest rate is expressed as a percentage of the principal; so if you took a $10,000 loan to buy a car, and have to repay 3% interest on that loan, $10,000 is the original principal amount, and 3% is the interest rate. In that example, at the end of the year, you would owe $300 in interest — essentially, you’ve paid $300 in exchange that year in exchange for borrowing the $10,000. It should be noted, though, that an interest rate only takes into account the amount of principal being borrowed. As described below, there are often other costs associated with taking a loan that you should consider.

An interest rate can either be variable, meaning it can change over time, or fixed, meaning the amount of interest remains the same. At Climb, our interest rates are fixed, so you don’t have to worry about your interest rate rising unexpectedly!

What is APR?

The annual percentage rate is also expressed as a percentage. (We know, you probably could have guessed that from the fact that the word “percentage” is in the name.) However, it differs from an interest rate in that it represents the entire cost over the term length. This means it includes loan fees or any other additional cost of borrowing.

Lenders can vary widely in the structures of their loans and the fees they include. Having a standard calculation such as APR means that you can easily compare what different loans will actually cost you.

What does this mean for you?

Because interest rate only refers to the interest on the principal and APR takes other costs into account, the latter tends to be higher. It’s important to keep in mind the rate of your interest, as that will impact your regular, periodic payments; however, APRs are what you should compare when looking at two different loan options. By law, lenders are required to disclose the annual percentage rate in order to ensure transparency and a clear understanding of the agreement on the part of the borrower; this way, you can’t be given a quote for a low interest rate and then be surprised later by fees that result in a high APR. When it comes to interest rate vs. APR, you definitely want to know both!

Want to see what rates you can get with Climb?

Click below to apply — there’s no commitment, and we only do a hard credit pull once a loan is funded. So you can apply multiple times to check various rates with no impact to your credit score!*

*Once a loan is funded we perform a hard credit pull, which may impact your credit score.

Leave a Reply

Your email address will not be published.Required fields are marked *

Subscribe to get more info sent straight to your inbox!

What to Expect: Realistic Outcomes

Climb’s Comprehensive Access Solution can offer a strategic balance of increased enrollments and upfront cashflows compared to traditional lenders. While no financing solution guarantees 100% collection, our data-driven approach maximizes both upfront cash and long-term repayment rates.

Typical Partner Results:

  • 15-30% of students qualify for Climb Loans with upfront tuition delivered to the school shortly after course start
  • 45-60% of students qualify for 0% APR* payment plans
  • Enrollment increases of 20%+ reported by partner schools**

**Results vary by school and student demographics. This represents performance reported by individual school partners and should not be considered a guarantee of your specific outcomes.

The bottom line: CAS is designed to maximize your net tuition recovery while eliminating the administrative headaches of student financing.

Maximizing Your Results

Pro Tip: Schools that require student deposits and set up automatic payments during enrollment see significantly better repayment performance across all financing options. These simple steps can meaningfully improve your outcomes.

FAQs

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

Students are placed into funding brackets (Elite, Standard, Enhanced) based on our AI assessment. Higher-credit students generate higher upfront payments to your school, while students with limited credit are seamlessly directed to our 0% Payment Plan.

These brackets are established using data from over $1 billion in career training loan originations and may be adjusted periodically based on updated repayment trends.

Important note: Regardless of which bracket a student falls into, they are considered fully paid by your school once funded. The student’s repayment obligation exists exclusively between Climb and the student.

Elite Access not available for Computer Science programs. Upfront percentages vary by industry and loan terms.

Once Climb disburses upfront funding for a student loan, that student is considered fully paid by your school. You will not receive any additional payments for that student—the single upfront payment is complete and final.

From that point forward, the student’s repayment obligation exists exclusively between Climb and the student. Your school has zero liability if the student defaults, and you keep the full upfront payment regardless of the student’s future payment performance.

They’re automatically offered our 0% Interest Payment Plan, ensuring no student is turned away while maintaining steady monthly cash flow for your school.

Higher-credit students generate larger upfront payments (75-100% of tuition), while students with limited credit use our 0% APR* Payment Plan for consistent monthly revenue. Both options are risk-free for your school

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Typically, within 5-10 business days after your partnership agreement is signed.

Comprehensive onboarding webinar, continuous partner support via AI-assisted chat and live email—and real-time borrower assistance with our live-chat-available student success team.

No. Climb fully manages the administrative responsibilities—your team simply monitors your school’s performance via our intuitive School Portal.

Your school is fully protected either way. For Climb Loans, you keep the entire upfront payment with zero liability. For Payment Plans, you only receive what students actually pay, with no risk to your school.