If you read the finance book, one of term that you will find is APR or the long name is annual percentage rate. It is important word especially for those who make a loan. In this article I’ll share the basic definition about annual percentage rate.
WHAT IS ANNUAL PERCENTAGE RATE (APR)
Annual Percentage Rate or known as APR is a numeric representation of your interest rate. It is the annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction. ( Investopedia)
APR makes it easier to compare different loans and credit cards, because you can easily see which loan/credit card would be cheaper. ( ABout.com)
TYPE OF ANNUAL PERCENTAGE RATE (APR)
There are different type of APR such as :-
1. Fixed APR
– An interest rate on a credit card that does not change unless the cardholder fails to pay on time. ( creditcards.org)
2. Default/ Penalty APR
– The APR charged on new transactions if you trigger the penalty terms in your credit card contract. Your credit card issuer may consider you in default if you pay late, go over your credit limit, or if your check is returned. These rates usually are higher than your standard or introductory rates. If you become more than sixty days late, the penalty APR may be applied to your existing balance. ( federalreserve.gov)
– Introductory annual percentage rate (APR) is a low rate offered by a credit card company as an incentive to apply for the card. The APR will go up after the introductory period is over. The Credit CARD Act of 2009 requires that introductory periods must last at least six months. The introductory rate is also known as the teaser rate. (creditcards.com
4. Variable APR
– A credit card interest rate which changes depending on whether other national rates or economic indicators change.
5. Cash Advance APR
– A cash advance is when a cardholder withdraws cash from an ATM or bank using the card, or writes and cashes a check against his or her credit card. Credit card companies charge a specialized APR against this type of transaction. The cash advance APR is commonly higher than the purchase APR. ( Creditcards.lovetoknow.com)
6. Delayed APR
– A different rate will apply in the future. For example, a card may advertise that there is “no interest until next March.” Look for the APR that will be in effect after March. (askville.amazon.com)
– Different rates are applied to different levels of the outstanding balance (for example, 16% on balances of $1–$500 and 17% on balances above $500). ( creditcards.lovetoknow.com)
8. Purchase APR
The APR you will pay for purchases if you carry a balance on your credit card. For many cards, you only have to pay interest on purchases if you carry over a balance.(creditcards.lovetoknow.com8. )
It is a bit technical but I think we can understand if we’ve loan. If you have any opinion let’s share with us.