By comparing the respective Annual Percentage Rates (APR). The federal government implemented the Truth-in-Lending Act in response to consumer demand for reform. Part of that resulted in the creation of the Annual Percentage Rate (APR) calculation. This is not the Note rate for which the borrower applied. The APR is the cost of the loan in percentage terms, taking into account various loan charges of which interest is only one such charge. Other charges which are used in the calculation of the APR are Private Mortgage Insurance (when applicable) and Prepaid Finance Charges (loan discount points, origination fees, prepaid interest and other credit costs). The APR is calculated by spreading these charges over the life of the loan, which results in a rate higher than the note interest rate. If interest was the only finance charge, then the interest rate and the Annual Percentage Rate would be the same. Comparing the APR between lenders is one factor that will assist in your decision regarding which is the best rate and product for you.