What Is APR And Why Should You Care
Essentially, APR (Annual Percentage Rate) is how much it costs to borrow money. It is the interest rate stated as a yearly rate. As well as the interest you pay on your credit, APR includes any fees and other charges such as admin fees or broker fees. It is a total charge for the loan for each year of the credit agreement.
Lenders are required by law to show the Representative APR rate on any consumer credit agreements. And, if you are comparing loans, then APR is an important factor to look at as part of your decision.
A loan from one lender may have lower interest rates than a loan from another, but the fees with the first may be higher. If you only compare interest rates, the first lender could look like the better option. But, when you compare APR, the interest and fees are included, so you may find that second lender is the better option overall.
Why should you care about APR?
It’s super important that you’re aware of the APR you’re paying on any debt you take out, because it’s the price you pay to borrow the money.
In general, you may want to stay away from debt with high APRs, as the interest payments could end up overwhelming your budget. But even if you manage to find debt with low APRs, taking out too much debt could cause you problems.
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