What does the interest rate mean for me? What is APR?

The interest rate is the cost of borrowing money, expressed as a percentage of the principal (the amount of money being borrowed). When you take out a loan or credit card, the interest rate determines the amount of interest you’ll be charged on the balance you owe.

For example, if you take out a loan with a 10% interest rate and borrow $1,000, you’ll be charged $100 in interest for the year. If you make no payments on the loan, the balance will continue to accrue interest, so you’ll end up paying more than the original $1,000 you borrowed.

The interest rate can have a significant impact on the overall cost of borrowing, so it’s important to understand how it works and to consider the interest rate when shopping for loans or credit cards. A higher interest rate means you’ll pay more in interest over time, while a lower interest rate can help you save money on interest charges.

Interest rates can vary depending on the type of loan or credit product you’re using, as well as your credit score and other factors. It’s a good idea to shop around and compare offers from multiple lenders to find the best interest rate for your situation.

What is APR?

APR stands for annual percentage rate, and it’s a measure of the cost of borrowing money that includes the interest rate and any additional fees or charges. The APR is expressed as a percentage and represents the total cost of borrowing money on an annual basis.

For example, if you take out a loan with a 10% interest rate and a $100 origination fee, the APR would be higher than the interest rate alone because it includes the additional fee. The APR is meant to provide a more accurate representation of the total cost of borrowing money because it includes all fees and charges associated with the loan.

When shopping for loans or credit products, it’s important to compare APRs rather than just the interest rate to get a better understanding of the true cost of borrowing money. The APR can help you compare offers from different lenders and choose the one that offers the best value. Keep in mind that the APR may vary depending on the type of loan or credit product you’re using and your creditworthiness.

Prominent Financial Consultants offers a range of services to help our clients succeed, and we would love the opportunity to discuss how we can help you. If you would like to schedule an appointment with us, please schedule a free 15 Minute Financial Clarity Call so that we can learn more about your needs and goals.