Annual Percentage Rate-APR
The annual percentage rate expresses the annualized rate usually for a loan. The term can refer to nominal APR or effective APR.
Nominal APR usually is calculated by simple interest and effective APR by compounded interest. Effective APR is the one the borrower will have to pay and is usually higher than nominal ADR.
It is important for a person with a responsible attitude toward personal finances to differ between the two and calculate the effective APR and not take the advertised APR at face value.
Related Terms
- Annual Percentage Yield-APY
- Effective Annual Interest Rate
- Annual Turnover
- Real Rate of Return
- Price/Earnings to Growth (PEG Ratio)
- Interest Rate
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