Financial Glossary: Annual Percentage Rate (APR)


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Annual Percentage Rate (APR)

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Annual Percentage Rate (APR)

Annual Percentage Rate (APR)

The cost of your credit as a yearly rate.

It takes into account Interest, points, loan Origination Fee, etc. It is a good Basis for comparing the cost of various loan programs, since all lenders are required to use the same guidelines in determining APR.

Annual percentage rate (APR) is an expression of the effective Interest rate the borrower Will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed. In other words the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options. To calculate the amount owed in Interest each month, divide the APR by twelve. For example, if the APR is 18% the monthly rate is 1.5%.

The APR is likely to differ from the "note rate" or "headline rate" advertised by the lender, due to the addition of other fees that may need to be included in the APR.

Posted by Information Management Network LLC.

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