QandAs: Loans

What is APR?

Answer:
Annual percentage rate, or APR, indicates how

much it costs to borrow money in relative terms of a fixed annual rate. In other words, when one borrows money, APR is used to describe how much it costs to borrow that money.

Money that is borrowed that has an APR attached does not mean that the loan must last a year or more, but can refer to the amount charged to borrow money for a shorter period of time as well. Many credit and lending financial products express lending rates in APR, including credit cards, auto and furniture financing, and mortgages.

Expressing credit costs in terms of annual percentage rates provides a regular way of comparing the credit costs across different terms. Many financial advisors caution that judging a credit offer only by APR is not wise, that one should consider the other terms of the extension of credit and what the APR actually includes.