You’ll face the term APR (Annual Percentage Rate) when you’re taking mortgages and loans via credit card. But, what’s the exact meaning of APR, and how does it work?
In this post, we’ll discuss all you need to know about APR in this article.
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What is APR (Annual Percentage Rate)
Annual Percentage Rate (APR) is a yearly interest that individuals need to pay on a loan. It’s included in everything from mortgages to car loans to credit cards.
Why is APR important?
When you understand APR and how it works, consumers are able to make better decisions before entering into a loan. You can also use this information to compare credit cards and which option is best for you.
Types of APR
There are two types of APR you’ll see most often:
What’s the difference between Fixed APR and Variable APR?
Fixed APR is the more ideal type, because it doesn’t typically run the risk of changing during the life of your loan. Variable, on the other hand, is controlled by an index interest rates. This means that if the index rate increases, so will your APR.
Where can you find your account’s APR?
You can easily find your credit card APR in monthly credit card statements. That’s the easiest way to find out your current APR.
What Impacts APR?
Some of the main things that can affect your APR are credit history, credit score, and credit activity.
What is a Good APR?
Keep in mind that APR rates are dependent upon your credit score. The higher your credit score, the lower your APR. With good credit, you can expect a rate below 14%.
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APR (Annual Percentage Rate) helps you understand the extra charges you need to pay when borrowing money. This information is a great way to help you gauge what to expect when taking on a loan and deciding whether the loan is right for you. The last thing you want to do is enter into a loan unprepared.