Finance Definition
Annual Percentage Rate (APR)
💳 Credit & loans
intermediate

Quick Definition

Annual Percentage Rate (APR) is the annual rate charged for borrowing or earned through an investment, adjusted for the frequency of compounding.

Formula

APR = (1 + (nominal interest rate / number of compounding periods)) ^ (number of compounding periods) - 1

Examples

  • 1A credit card with an APR of 20% means you will pay 20% interest on your balance over the course of a year, assuming you carry a balance.
  • 2A mortgage with an APR of 3.5% indicates the yearly cost of the loan, including interest and other fees.
  • 3A car loan advertised with a 5% APR means the borrower will incur 5% interest annually on the loan amount, plus any additional fees included in the APR.

Tags

APRinterest ratesloanscredit cardsmortgages
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Quick Info
Category:Credit & loans
Difficulty:intermediate
Last Updated:6/17/2025