Calculating
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.