APR - Your Ultimate Guide to Annual Percentage Rates
Which statement about the Annual Percentage Rate (APR) is true?
a) The APR is not a good way to compare loans
b) The APR does not take into account the number of payments on a loan
c) The APR takes into account the fees for a loan
d) If the APR is 6%, you will pay 6% per month for the loan.
Final answer:
The true statement about APR is that it does take the fees of a loan into account, making it a useful tool to compare different loans. It is calculated on an annual basis, not monthly, and takes the total cost of borrowing into account.
Understanding Annual Percentage Rate (APR)
Are you curious about the Annual Percentage Rate (APR) and how it affects your loans? Let's dive into the world of APR and demystify this important financial concept!
When it comes to comparing loans, the APR plays a crucial role. It incorporates not only the interest rate but also any fees associated with the loan. This means that the APR provides a more accurate representation of the total cost of borrowing.
Unlike common misconceptions, the APR is calculated on an annual basis, not monthly. So, if you see an APR of 6%, it means you will pay 6% annually for the loan, not monthly as mentioned in option d).
The true statement, as mentioned in option c), is that the APR takes into account the fees for a loan. This makes it a comprehensive measure of the actual yearly cost of the loan, making it easier for you to compare different loan options and choose the best one for your financial needs.