Definition
The yearly cost of borrowing money, including interest and certain fees. It helps you compare different loan or credit offers.
What to consider
- Use APR as a quick way to compare loans or credit cards.
- Small differences can really add up over time, so pay attention.
- Keep an eye on your APR, especially if your credit score improves.
Real world scenarios
- Shanna compares the APR on three different credit cards to find the cheapest option for balance transfers. She chooses the one with the lowest rate to save on interest.
- When taking out a personal loan, Alex checks the APR to understand how much he will actually pay over time. The lower APR helps him budget effectively.
- Understanding APR helps Reggie forecast the total interest cost on his auto loan, ensuring he picks a deal that fits his monthly payment range.
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