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Annual Percentage Rate (APR)

Annual Percentage Rate (APR)

What is the Annual Percentage Rate (APR)?

Annual percentage rate (APR) is the amount of yearly interest paid by the borrower on a loan. APR is a measure of the simple interest for a loan and does not take into account the compounding that happens. Annual percentage yield (APY) is a similar metric that factors in compounding.

APR is a useful rule of thumb to see what the cost looks like when borrowing money. Keep in mind that certain loans, like ARMs, may result in a misleading APR as it fluctuates depending on established variables.

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