Annual Percentage Rate

The cost of carrying a balance on a loan expressed as an annual percentage. To calculate the amount owed in interest each month divide the APR by 12. For example, if the APR is 18% the monthly rate is 1.5%. In comparing types of loans, whether it’s a fixed rate loan to a fixed rate loan, adjustable rate loan to adjustable rate loan or fixed rate loan to adjustable rate loan, there is one standard way to compare them, APRs. APRs are a way to calculate the annual cost of loans, taking into consideration loan origination fees, points and the other associated costs.

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