What is an APR?
The Annual Percentage Rate or APR is a tool intended to make comparison between mortgages simpler for the average consumer by disclosing the “total cost of credit”, including fees, expressed as an annual rate. The APR is part of the Truth in Lending disclosure statement that is required for all residential mortgage loans.
APR stands for “Annual Percentage Rate.” It is the interest rate on a debt expressed as a yearly rate (rather than a monthly one, for example). The APR was created to make it easier to compare credit offers. Please keep in mind that an APR does not include additional costs such as annual fees or penalty fees (for credit cards) or closing costs (for mortgages). You can find more credit definitions in our personal finance glossary.
Annual Percentage Rate (APR) is the cost of getting credit. This cost is calculated as a percentage of the amount you borrow and is expressed in yearly terms. For example, APR of 17% means that the cost of borrowing a $1000 dollars for one year is $170. Money that you borrow for a shorter period is charged with a periodic. Credit Card companies are required to disclose the APR before your credit application is finalized. They are also required to publish the APR on the credit card statement. Make sure that you check the rate on the regular basis, since the APR can change often, even when it is defined as fixed and not as a variable APR. Many credit cards offer different APRs for purchases and for balance transfers or cash advances. Usually the APR for cash advances is the highest, making cash advances a very expensive way to borrow money. See also… What is the difference between a Fixed APR and a Variable APR? What are the Terms and Conditions for a credit card? How does a credit car
