What does APR stand for?

APR stands for Annual Percentage Rate, which is a crucial term in personal finance. It reflects the total cost of borrowing or the total return on an investment, expressed as a yearly interest rate. This measure provides consumers with a clear understanding of the borrowing costs associated with loans, such as credit cards and mortgages, and includes not only the interest rate but also any additional fees or costs that might be incurred.

Understanding APR helps individuals make informed comparisons between different loan offers. A lower APR typically indicates a less expensive loan, making it an important figure for budgeting and financial planning. This comprehensive nature of APR is what distinguishes it from other options, which do not accurately represent the concept used in financial contexts.