{"id":816,"date":"2020-07-21T16:06:11","date_gmt":"2020-07-21T16:06:11","guid":{"rendered":"http:\/\/ec2-3-209-223-66.compute-1.amazonaws.com\/?p=816"},"modified":"2023-12-07T10:27:54","modified_gmt":"2023-12-07T16:27:54","slug":"what-is-apr-and-why-does-it-matter","status":"publish","type":"post","link":"https:\/\/www.accrediteddebtrelief.com\/blog\/what-is-apr-and-why-does-it-matter\/","title":{"rendered":"What Is APR and Why Does It Matter?"},"content":{"rendered":"\n

If you\u2019ve explored your credit card options or looked into a mortgage or car loan, you\u2019ve likely come across the term APR. This number can be a quick way to compare borrowing costs, but understanding what goes into the calculation and what this percentage truly means can be tricky.<\/p>\n\n\n\n\n\n\n\n

In this article, we\u2019ll break down the basics of APR, how it applies to credit cards and loans, and the most important things to remember when reviewing your options.<\/p>\n\n\n\n

What Exactly is an APR?<\/h2>\n\n\n\n

APR is short for annual percentage rate. This percentage expresses the yearly cost of funds charged to borrowers over the term of a loan. APR can also be thought of as the actual cost of borrowing the money.<\/p>\n\n\n\n

A financial product\u2019s APR is expressed as a percentage that includes interest, fees and other costs related to the loan. Lower APRs are usually<\/em> better, as they suggest that the annual cost of borrowing will be lower.<\/p>\n\n\n\n

APRs provide a more holistic view of how much a financial product might cost. They can be used to easily compare your borrowing options. Your APR can be found on your loan agreement, as well as on your loan\u2019s statements.<\/p>\n\n\n\n

Interest Rate vs. APR<\/h2>\n\n\n\n

APRs and interest rates are two separate things. A loan\u2019s interest rate is the rate that a borrower pays on a loan, excluding<\/strong> any other costs. The APR of that same loan includes the loan\u2019s interest rate and<\/strong> any additional fees associated with that loan. <\/p>\n\n\n\n

The only exception is with credit card APRs. While you may have additional expenses tied into your card, such as an annual fee, penalties for late payments or charges for cash advances, credit card companies don\u2019t<\/strong> include these in their APR calculations.<\/p>\n\n\n\n

How Do I Calculate My APR?<\/h2>\n\n\n\n

You can calculate the APR for most loan products by using the following formula:<\/p>\n\n\n\n

\"APR<\/figure>\n\n\n\n

Note that this calculation does not include compounding interest rates, but it can help to visualize the cost of your loan for one calendar year.<\/p>\n\n\n\n

APR and Your Credit Card<\/h2>\n\n\n\n

If you\u2019re the type of person who pays off their ending balance every month by the due date, APR won\u2019t be your biggest concern. <\/p>\n\n\n\n

\u201cThe most important thing to remember with respect to credit card APRs is that as long as you pay off your balance in full each billing period, you\u2019ll never be charged interest, so you won\u2019t have to worry about APR at all,\u201d said Sean Messier, associate editor of Credit Card Insider<\/a>.<\/p>\n\n\n\n

For those of us who do carry a balance month to month, a few different costs may come into play. Before committing to a credit card, read the fine print and familiarize yourself with the following:<\/p>\n\n\n\n