Although APR and APY seem similar, they are used in different types of applications. APR applies to loans, such as personal loans and credit cards. It represents the annual cost of borrowing, including interest and fees. On the other hand, APY is used for savings accounts and investments, representing the annual rate of return, including compound interest. While both provide valuable information, APY accounts for the compounding effect on savings, making it a more accurate measure for evaluating investment returns.