A.P.R. (Annual Percentage Rate)
Ron explains it all in just 60-seconds.
So what is an APR, really?
APR (or Annual Percentage Rate) is the total yearly cost of borrowing money, expressed as a percentage. It includes the interest rate plus any extra fees or costs that come with the loan. That makes it a more accurate number than just “interest rate” alone.
APR helps you compare loans, credit cards, or financing options apples-to-apples. A loan with a 5% interest rate and $500 in fees may end up with a much higher APR than one with no fees.
The higher the APR, the more expensive it is to borrow. It’s especially important for credit cards, where rates can skyrocket. If you’re borrowing money, APR is the number that tells you what it really costs to play.
The interest rate is the bait. APR is the bill.
How people actually use it in a sentence...
“Devon got a ‘low-interest’ loan, but when he saw the APR, he realized the bank had a very different definition of ‘low.’”
Did you know...
In 1968, the U.S. passed the Truth in Lending Act, which made it mandatory for lenders to disclose APR so consumers could actually compare options.
Before that, banks could hide fees behind confusing terms… and many still try to. They just find more more legal ways of doing it.
Want the textbook definition? Check out APR on Investopedia.com