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What is APR?
APR is the acronym for annual percentage rate. The APR is a reference to a federally required calculation of the yearly cost of a loan that includes interest rates and other fees.
The requirement for APR disclosure was intended to help consumers compare loans. Unfortunately, the requirements for what is included in the calculation of APR are not sufficiently standardized to create a reliable comparison guide. Some fees are included, such as processing and underwriting fees, but other fees may or may not be in the APR calculation. For example, fees for title or abstract, notaries, inspections, and so on, may or may not be included. So be sure you ask what is included in an APR before you use it to compare loans or credit.
An APR on a credit card will not include late fees, over-the-limit fees, or finance charges you may incur by not paying off your balance each month. So the APR may not reflect the entire cost of the credit.
(Reviewed 10.31.2008)
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