What is Annual Percentage Rate - APR?

Annual Percentage Rate APR for short is the annual cost of a loan expressed in a percentage. APR covers everything concerning the loan from interest rates, insurances, penalties and taxes. Though how the APR is calculated differently from creditor to creditor they might include or exclude different costs.

It is important to carefully study the loan contract before putting down your signature on it. Most creditors are promoting the monthly interests because those numbers are more attractive and they get more customers for example a lender advertises the monthly APR which is 5% that means your paying 5% each month but looking it in a year perspective that's 60%. APR is used by credit card companies and card dealers.