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How to Calculate APR?

How to Calculate APR?

the annual percentage rate will prove to depend on the nature in which it is
being applied. For example, calculating the APR for a mortgage loan may prove
to be different than that applied for a credit card. However, the one key
component to consider in with APR calculations is how they are included in the
payment plan or installment structure.

Furthermore, a credit card APR is not the same as with
mortgage loans, where there is a fixed interest rate in place. Credit card APRs
will prove to be more of an estimate because of the fact that once the balance
is paid off on a credit card one can use it or borrow more money subsequent
times. Furthermore, the credit card APR may also increase the more that the
card is used and the more a balance is accrued.

Calculating a credit card APR or other type of
loan APR can prove to be confusing, particularly because there are various
circumstances that may play a factor. Typically speaking, an APR calculator is
commonly used to derive an APR.

An example
could be in the case of a loan for a total of $200,000. Aside from the total
amount borrowed, there is a total of another $5,000 in extra costs and fees
also applied to the loan. The APR rate is 7.5% for a period of 30 years. This
situation can be an example of an APR for a mortgage loan with a term of 30
years. The final monthly payment will be given as $1,433.39, using a total of
360 payments.