What's Annual Percentage Rate (APR)? Why is it different from the interest rate?
Federal Truth-in-Lending laws require that whenever a rate is advertised to the
public it must be done in conjunction with an Annual Percentage Rate (APR). The
APR calculation takes various lender charges like discount fees, origination fees,
underwriting or closing fees paid to the lender and subtracts them from the
face amount of the loan, resulting in an amount called the
"amount financed". The second part of the calculation divides the annual amount
of interest paid by the "amount financed", which gives the APR.
The government's idea for requiring this APR is that borrowers could then get
the "true cost" of the loan. Then, by comparing the APR's of different lenders
the borrower could get the best deal. The truth is - it is a complex formula that
many people, even some lenders, don't understand; but, it's still the law.
The APR calculator provided here will help you to determine whether you get a
great deal or not. If you have a special situation you want to discuss with us,
Please feel free to send us an e-mail here.
