What does APR stand for in the context of loans?

APR in the context of loans stands for Annual Percentage Rate. This term is critical for understanding the true cost of borrowing. It represents the annualized interest rate that includes not only the interest costs but also any fees or additional costs associated with the loan, expressed as a percentage. By using APR, borrowers can compare different loan offers more effectively, as it provides a standard measure of the cost of borrowing over time.

This makes APR a valuable tool for making informed financial decisions, as it goes beyond just the nominal interest rate to encompass the overall cost of the loan. Understanding this concept is essential for anyone looking to borrow, whether for personal loans, mortgages, or credit cards, as it allows for a clearer assessment of which loan is truly the most economical option.