Annual percentage rate
Interest rate for a whole year / From Wikipedia, the free encyclopedia
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The term annual percentage rate of charge (APR),[1][2] corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR),[3] is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card,[4] etc. It is a finance charge expressed as an annual rate.[5][6] Those terms have formal, legal definitions in some countries or legal jurisdictions, but in the United States:[3]
- The nominal APR is the simple-interest rate (for a year).
- The effective APR is the fee+compound interest rate (calculated across a year).[3]
The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (June 2022) |
In some areas, the annual percentage rate (APR) is the simplified counterpart to the effective interest rate that the borrower will pay on a loan. In many countries and jurisdictions, lenders (such as banks) are required to disclose the "cost" of borrowing in some standardized way as a form of consumer protection. The (effective) APR has been intended to make it easier to compare lenders and loan options.