APR and APY are two forms of interest rates. Both are measurements for yields generated by protocols, centralized digital asset lending platforms, and other crypto investment platforms.

Some platforms may use APR, while others work out yields using APY. While they may sound similar, the two interest rates do not generate the same results.

What is APR?

APR (annual percentage rate) is the annual yield a lender earns for lending their crypto assets.

Alternatively, you can think of APR as the annual interest a borrower pays on any loan. In other words, it’s the price you pay to borrow money, as per the U.S. Consumer Financial Protection Bureau’s definition.

Traditional financial institutions apply APR to mortgages, credit cards, car loans, and other types of credit. Within the crypto space, APR is applied to staking, crypto savings accounts, and lending and borrowing with crypto assets. Generally, APR is used for things that cost people money but may also appear in products that make people money, particularly in the crypto space.

While APR is an annualized rate, borrowers often pay their loans monthly or more frequently, depending on the payment schedule. Furthermore, since it’s an annual rate, APRs are prorated — adjusted — for shorter periods. So, a 3% APR on a six-month loan means that the loan only comes with a charge of a 1.5% interest rate.

Types of APR

APRs can be fixed or variable. A fixed APR doesn’t change. On the other hand, a variable APR can alter at any time depending on market conditions and any other factors the lending platform may decide to factor in. As a result, borrowers are likely to pay more interest with a variable APR than a fixed one. This is especially true if market conditions are volatile.