Finance
What Is APR (Annual Percentage Rate)?
APR is the yearly cost of borrowing money, including interest and standard fees, expressed as a percentage — without compounding effects.
APR (Annual Percentage Rate) expresses the yearly cost of a loan as a single percentage, combining the nominal interest rate with standard fees. It exists so borrowers can compare loan offers on equal footing.
APR does not account for intra-year compounding, which is why a credit card advertising 24% APR effectively costs about 26.8% per year when interest compounds monthly. For savings and investments, the compounding-inclusive figure is called APY.