Annual Percentage Rate - APR definitionEdit

The annual rate that is charged for borrowing (or made byinvesting), expressed as a single percentage number that         represents the actual yearly cost of funds over the term of a loan.This includes any fees or additional costs associated  with thetransaction.
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Loans or credit agreements can vary in terms of interest-ratestructure, transaction fees, late penalties and other factors. Astandardized computation such as the APR provides borrowers witha bottom-line number they can easily compare to rates charged byother potential lenders.

By law, credit card companies and loan issuers must showcustomers the APR to facilitate a clear understanding of the actualrates applicable to their agreements. Credit card companies areallowed advertise interest rates on a monthly basis (e.g. 2% permonth), but are also required to clearly state the APR to customersbefore any agreement is signed. For example, a credit cardcompany might charge 1% a month, but the APR is 1% x 12months = 12%. This differs from annual percentage yield, which also takes compound interest into account.

Related Links 

Understanding The Time Value Of Money How the Distinction Between APR and APY Affects You

See also: Annual Percentage Yield - APY, Annualize, Compound Interest, Credit Card, Yield
Also spelled: APR

Word english dictionaryEdit

APR the annual equivalent of a rate of interest when the rate isquoted more frequently than annually, usually monthly