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Annual Percentage Rate (APR)

What is APR?

APR stands for Annual Percentage Rate.

It is a key concept in the financial industry that describes the cost of borrowing or the return on investment over the course of a year. APR is typically expressed as a percentage and is used in various financial contexts:

  • Loans: When you borrow money, whether it's through a personal loan, mortgage, credit card, or any other type of loan, the APR represents the total cost of borrowing over a year. It includes not only the interest rate but also any additional fees or costs associated with the loan, such as origination fees or points. This allows borrowers to compare the true cost of different loan offers.
  • Credit Cards: Credit card APR refers to the annualised interest rate charged on unpaid balances. It's essential for credit card users to understand their card's APR, as it can significantly impact the cost of carrying a balance and making minimum payments.

Is APR important to look at when considering a financial product?

APR provides consumers with a standardised way to compare financial products and understand the true costs or returns involved. It's an important tool for making informed financial decisions, whether you're borrowing money or investing your savings. When evaluating financial offers, it's important to pay attention to the APR to get a full picture of the associated costs or potential gains.

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