Whats the difference between the interest rate and the APR in a mortgage loan. How is ARP calculcated?
No, I don’t want your example, I’ll use my own. The APR is the “effective” interest rate on the loan, considering all “prepaid items”. Look at it this way. Say you’re borrowing 100,000 for one year, and you are going to pay 12 per cent with no up front fees. At the end of the year, you repay 112,000, interest is 12 per cent, APR is 12 per cent. Now, say you could borrow at 10 per cent, but the prepaid charges are 3,000. According to the Truth in Lending, you’re getting 97,000, and you’ll repay 110,000 at the end of the year. Interest rate is still ten percent, but the APR is 13.5 or so, because you’re paying back 13,000 more than you actually received. If that doesn’t make sense, email me.
