What is annual percentage rate of charge (APR)?

The term annual percentage rate of charge ( APR ), corresponding sometimes to a nominal APR and sometimes to an effective APR ( EAPR ), is 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.

What is the difference between APR and interest rate?

Annual percentage rate, or APR, reflects the true cost of borrowing. Mortgage APR includes the interest rate, points and fees charged by the lender. APR is higher than the interest rate because it encompasses all these loan costs. Here’s a primer on the difference between APR and interest rate, and how to use it to evaluate mortgage offers.

How is Apr calculated?

APR is calculated by multiplying the periodic interest rate by the number of periods in a year in which it was applied. It does not indicate how many times the rate is actually applied to the balance.

What is a 0% APR loan?

The federal Truth in Lending Act requires that every consumer loan agreement list the APR along with the nominal interest rate. Lenders must follow the same rules to ensure the accuracy of the APR. Borrowers with the best credit in most ideal credit conditions may secure 0% APR deals.