If you're not a math wizard and do not understand the terms, then it would be prudent to get a friend or professional to help out. The more you understand how annual percentage rate is calculate, the better you can base your decisions on the types of credit you use, the amount of interest you pay, and which creditors are charge the highest, or lowest interest rates.
You could be spending more money on interest costs than you really need to. You could use any extra interest rate costs saved on paying down your debt. It's imporant to know that interest can be calculated daily, monthly, semi annually or annually. It all depends. It is good to ask your creditor how they're charging you, and if there is any more cost effective way you could pay.
Also...If you 're paying a high annual percentage rate, ask the creditor how you can get the lowest APR possible.
DEFINITIONS Who what where when why how?
According to http://www.businessdictionary.com annual percentage rate is Standardized method of quoting the effective interest rate (actual cost of credit) on consumer loans, specially where interest is computed on monthly or other non-annual basis. An APR includes all fees (except penalties), and takes into account the continual reduction of principal amount through amortization. See also add on loan.
According to http://www.mortgagefit.com/apr.html APR (Annual Percentage Rate) to compare mortgage lenders If you're willing to know how much your mortgage costs, the APR or Annual Percentage Rate is what you should watch out for. Lenders are required to disclose the APR as part of the Truth-in-Lending disclosure (as per the Truth-in-Lending Act). What is APR? The APR is not the actual rate or note rate advertised by the lender. It is the effective rate which represents the cost of borrowing a mortgage loan. Lenders calculate APR taking into account the closing costs and the interest rate on a mortgage. As a borrower, you too can calculate the APR using the APR Calculator.
The Annual Percentage Rate is often used to compare mortgage lenders and the programs they offer. However, it is not an effective tool for lender/loan comparison because a mortgage with high APR may often be a better option compared to one with a low APR.
What fees/costs does the APR include? Some of the fees/closing costs that the APR includes are: Points (discount and origination points) Prepaid interest (from closing date to the end of the month) Loan processing fee Underwriting fee Document preparation fee Private mortgage insurance
