Annual Percentage Rate (APR)

What Is An Annual Percentage Rate (APR)?

An Annual Percentage Rate (APR) is a measure of the cost of credit expressed as an annualized rate. It includes both interest and any other fees or charges associated with borrowing money, such as origination fees, closing costs, and late payment penalties. The APR allows borrowers to compare different types of loans on an apples-to-apples basis by taking into account all the costs associated with each loan product.

The APR is typically higher than the stated interest rate because it takes into account additional expenses that may be charged over the life of the loan. For example, if you take out a mortgage for $200,000 at 4% interest but have to pay $2,000 in closing costs up front then your effective APR would be slightly higher than 4%. This is why it’s important to understand what goes into calculating an APR before signing any loan documents so you can make sure you are getting a fair deal from your lender.

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