What Is the Annual Percentage
Rate?
The Annual Percentage Rate (A.P.R.) is the cost of
your credit expressed as an annual rate. Because
you may be paying loan discount "points" and other
"prepaid" finance charges at closing, the A.P.R.
disclosed is often higher than the interest rate on
your loan. This A.P.R. can be compared to the
A.P.R. on other loan programs to give you a consistent
means of comparing rates and programs.
Why is the Annual Percentage Rate
different from the Interest rate for which I applied?
The A.P.R. is computed from the amount financed
and is based on what your proposed payments will be on
the actual loan amount credited to you at settlement.
In a $50,000 loan with $2,000 Prepaid Finance Charges,
a 30 year term, and a fixed interest rate of 12%, the
payments would be $514.31(principal and interest).
Since the A.P.R. is based on the Amount Financed
($48,000), while the payment is based on the actual
loan amount given ($50,000), the A.P.R. (12.553%) is
higher than the interest rate. |
