What is APR?
APR stands for Annual Percentage Rate. It shows the total yearly cost of borrowing money, including interest and some fees.
Why APR matters
APR helps you compare loans more easily. A lower APR usually means a cheaper loan overall.
APR vs Interest Rate
The interest rate is just the cost of borrowing. APR includes the interest plus extra costs, so it gives a more complete picture.
Example
Two loans may have the same interest rate but different APRs. The one with the lower APR is usually cheaper overall.
What affects APR?
- Your credit score
- Loan length
- Fees and charges
- Type of loan
Final thought
Always check the APR when comparing loans. It gives a clearer idea of the true cost.