| | A | Annual Percentage Rate - APR |
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| What does APR mean?
APR stands for Annual Percentage Rate and basically it means the total costs of a loan for one full year compounded in to one percentage. This includes points, interests, insurances and any additional costs concerning transactions or late penalty fees. APR helps to compare finance costs. This is applied on car loans, mortgages and even on credit cards.
For example you have a periodic rate 3.5% and after a quarter year your APR will be 14%. The law states that any type of loan issuers or credit card company has to clearly show their APR so that the buyers understand the rates which they will be paying according to the contract. Many people might not tell apart a monthly APR and a yearly one, this is why it's important to carefully read the agreements. It is acceptable for loan givers to advertise monthly rates the credit card company charges 3% a month that means 36% a year. APR is calculated differently cause lenders might not include or exclude some fees or taxes like title fee, transfer tax and such. Costumers can get fooled very easy if they don't know the difference while they are thinking of paying less the actual reality is that they are paying more then they realize. | | | | |
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