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annualized percentage rate


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(APR)

The true cost of borrowing money from a lender. Introduced in 1977 to provide consumers with a ‘true rate’ benchmark for comparison because lenders were quoting apparently very good headline rates, but charging interest on all of the initial loan for the whole period, taking no account of the reducing level of debt. Initially mortgages were excluded from the requirement that all loan illustrations show the APR, because of the variety of fees and charges associated with mortgages. Now mortgages do have to display the APR, inclusive of all compulsory fees or charges associated with them. It represents an equivalent rate with interest payable annually in arrears.

http://www.moneymadeclear.fsa.gov.uk/products/loans/what_is_apr.html An example of how APR is calculated.

Subjects: Mathematics.


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