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Why is APR higher than the actual rate quoted?

April 26, 2017actual Apr quoted rate

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Why is APR higher than the actual rate quoted?

1 Answer

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APR represents the cost of loan as a yearly rate. To calculate APR, the finance charges are deducted from the loan amount. The result is the amount financed. The full principal and interest payment is then applied to the amount financed, as if it were the loan amount. The result is the APR.