◈ GLOSSARY · PERSONAL FINANCE
Annual Percentage Rate (APR).
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
APR is the yearly cost of borrowing expressed as a percentage, including both the interest rate and mandatory fees such as origination charges. Federal law (Truth in Lending Act) requires lenders to disclose APR so borrowers can compare offers on equal footing. A mortgage with a 7.0% interest rate and 0.5% in upfront points will carry an APR above 7.0% because those fees are spread over the loan life. APR is the right number to compare across lenders; the nominal rate alone understates the true cost of credit.
◈ RECOMMENDED READING
