What is APR?
APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers. The APR includes important factors such as: • the interest rate you must pay; • how you repay the loan; the length of the loan agreement (or term); frequency and timing of instalment payments; and amount of each payment; • certain fees associated with the loan; and • premiums for payment protection insurance that the lender chooses to make compulsory. All lenders have to tell you what their APR is before you sign an agreement. It will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around. Example 1: If you borrow £1,000 for one year at 20% interest, and at the end of the year you repay a lump sum of £1,200: • you will be paying an interest rate of 20%; and • the APR will also be 20%. Example 2: If you borrow £1,000 for one year at 20% interest, and pay throughout the year in equal monthly ins
The annual percentage rate, or APR, is an interest rate that differs from the loan rate. It is the actual yearly interest rate paid by the borrower, including the points charged to initiate the loan and other costs. The APR discloses the real cost of borrowing by adding on the points and by factoring in the assumption that they will be paid off incrementally over the life of the loan. The APR is usually about 0.5 percent higher than the loan rate and is commonly used to compare mortgage programs from different lenders. The Federal Truth in Lending law requires mortgage companies to disclose the APR when they advertise a rate. The APR is usually found next to the mortgage rate in newspaper ads.
APR, or Annual Percentage Rate, is the effective rate that takes the lender bank’s charges into consideration and express the total of all bank charges in the form of an interest rate. Because there are always other finance charges in addition to the note rate (the interest rate base on which payments are calculated), the APR is almost always higher than the note rate. The APR is one of the items required by the Truth-in-Lending to disclose to every potential borrower.
APR is abbreviation for ‘ annual percentage rate’. It is the exact annual cost of a loan including interest rate, upfront payment, closing costs or pre-paid percentage points. It is a better indicator of the actual repayment outgoings than interest rates. Every lender and broker is required by US federal law to clearly state the APR in the specified column of the loan documentation.
