The
abbreviation APR, in terms of finance, refers to an annual percentage rate. The
annual percentage rate is the interest that is being charged or implemented on
a particular loan. Typically speaking, an APR will usually be included in most
large loans, such as in a mortgage home loan and motor vehicle financing.
An annual
percentage rate will prove to be a very important facet in regards to loans,
for they will ultimately affect the final amount that is to be paid by the
debtor of the loan. Furthermore, APR rates will differ in terms of the nature
of the loan and even location.
Typically speaking, an annual percentage rate is
implemented in order to cover certain costs as well as interest. Some of the
other costs included in an APR may be loan fees, closing costs, application
fees, and the actual cost of the loan itself.
Another
important aspect to consider in regards to an annual percentage rate is how it
is applied in terms of payments. In many cases, in the initial life of certain
loans the first payments will usually be applied toward the interest rather
than the principal amount. As more payments are made, more of the payment will
be applied toward the principal balance. This is why being aware as to how an
annual percentage rate is to be included in a loan is important. In some
instances, high interest rates amounts in the beginning of a loan will oftentimes
also be included in the APR.
