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APR
(Annual Percentage Rate)
APR (Annual Percentage Rate) represents the yearly cost of borrowing, including interest and fees, expressed as a percentage. It helps borrowers compare loan and credit card offers.
Unlike the nominal interest rate, APR factors in additional costs like origination fees, making it a more accurate measure of the true cost of debt. For example, a credit card with a 15% APR charges 15% annually on unpaid balances. Mortgage lenders are required by law to disclose APR, ensuring transparency. According to the CFPB, understanding APR is critical to avoiding predatory lending. Always compare APRs—not just interest rates—when evaluating loans or credit products.
Unlike the nominal interest rate, APR factors in additional costs like origination fees, making it a more accurate measure of the true cost of debt. For example, a credit card with a 15% APR charges 15% annually on unpaid balances. Mortgage lenders are required by law to disclose APR, ensuring transparency. According to the CFPB, understanding APR is critical to avoiding predatory lending. Always compare APRs—not just interest rates—when evaluating loans or credit products.