APR was designed to allow consumers to use one standardized number to compare the real cost of each lender's interest rate and it works like this. If I lend you, $10,000 and, I charge a $500 Bump-ta-Bump Fee, you will actually receive $9,500, however you must still repay me $10,000. APR is my real yield and your real cost on this loan. We agreed that you will repay the loan at 8% interest on $10,000, HOWEVER you only received $9,500 therefore (1 comments)