BUSINESS SPEAK · APR
APR: Annual percentage rate
A loan’s yearly cost with the fees folded in.
What it means
APR is the interest rate that would produce the same monthly payment if the upfront fees were treated as borrowing costs. It lets you compare loans with different fees fairly.
Where you’ll meet it
- Lenders in many countries must show APR alongside the headline rate.
- A low rate with high fees can have a higher APR than a slightly higher rate with no fees.
Worked example
Scenario: You borrow 20,000 at 8% for 5 years and pay 800 in fees.
- Payment on 20,000 at 8%: about 405.53 a month
- You actually receive 20,000 − 800 = 19,200
- The rate that makes 19,200 cost 405.53 a month ≈ 9.7%
Answer: APR is about 9.7%, not 8%.