GLOSSARY · DEBT & HOUSING
Annual percentage rate (APR)
The yearly cost of borrowing expressed as a percentage, which federal law requires lenders to disclose. For a loan it includes the interest rate plus certain required fees, such as an origination fee, spread over the term; for a credit card it is the interest rate itself. Comparing APRs, not advertised rates, is the fair way to compare two offers.
Also called: APR, annual percentage rate, interest rate on a card
FORMULA
Monthly interest on a card ≈ balance × APR ÷ 12
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · UNDERSTANDING YOUR DEBT · FOUNDATIONSWhy Debt Is Hard to EscapeCHAPTER · UNDERSTANDING YOUR DEBT · FOUNDATIONSTypes of Debt and What Sets Them ApartRELATED TERMS
SOURCES
- Regulation Z (Truth in Lending), 12 CFR Part 1026. Consumer Financial Protection Bureau.