what is apr in finance

APR stands for Annual Percentage Rate, which is a yearly interest rate charged for a loan or earned by an investment. It is a broader measure of the cost to you of borrowing money since it reflects not only the interest rate but also the fees that you have to pay to get the loan. The APR provides consumers with a bottom-line number they can compare among lenders, credit cards, or investment products. It is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan or income earned on an investment. APR is calculated by taking into account monthly payments, fees, and other costs associated with the transaction. It is important to note that APR shouldnt be confused with APY (annual percentage yield), which takes the compounding of interest into account. In the case of credit cards, the interest rate is typically stated as a yearly rate, and this is called the annual percentage rate (APR) . An APR is a more complete measure of the cost of borrowing money than the interest rate alone.