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APR

1 Sep   

APR or Annual Percentage Rate

the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate. Those terms have formal, legal definitions in some countries or legal jurisdictions, but in the United States:

  • The nominal APR is the simple-interest rate (for a year).
  • The effective APR is the fee+compound interest rate (calculated across a year).

In some areas, the annual percentage rate (APR) is the simplified counterpart to the effective interest rate that the borrower will pay on a loan. In many countries and jurisdictions, lenders (such as banks) are required to disclose the “cost” of borrowing in some standardized way as a form of consumer protection. The (effective) APR has been intended to make it easier to compare lenders and loan options.