?
Solved

interest rate vs. APR

Posted on 2013-05-15
2
Medium Priority
?
369 Views
Last Modified: 2013-05-31
I wanted to know what the difference is between interest rate vs. APR?  More within a mortgage environment.
0
Comment
Question by:uppercut7141
[X]
Welcome to Experts Exchange

Add your voice to the tech community where 5M+ people just like you are talking about what matters.

  • Help others & share knowledge
  • Earn cash & points
  • Learn & ask questions
2 Comments
 
LVL 27

Expert Comment

by:d-glitch
ID: 39168906
The APR refers to the Annual Percentage Rate.

Interest rate is more generic.

If your interest rate is 1% per month, your APR will be more than 12% per year because of compounding.

If you pay points on a mortgage to get a lower interest rate, your APR will be higher because the points cost and other fees will be amortized over the life of the loan.

APR tries to give you a standard way to compare the costs of borrowing for different types of loans with all sorts of gimmicks.

   http://en.wikipedia.org/wiki/Annual_percentage_rate

Note that there will be a legal definition for the effective APR in your jurisdiction.
0
 
LVL 37

Accepted Solution

by:
TommySzalapski earned 2000 total points
ID: 39168953
Also of note is the APY and the GFE.
APY is the Annual Percentage Yeild which is how much the interest really comes to over a year.
For example, if you are charged 12% APR but it compounds at 1% each month, then you really end up paying about 12.68% interest at the end of the year (since the interest each month includes what was added last month).

GFE is the Good Faith Estimate where the lender gives you a number that is their best guess at the total cost of the loan over the agreed upon period. To me, that is the most important number since it's the true cost of the loan. Of course you can calculate that yourself based on the other input, but they are required to give it to you in many places.
0

Featured Post

On Demand Webinar - Networking for the Cloud Era

This webinar discusses:
-Common barriers companies experience when moving to the cloud
-How SD-WAN changes the way we look at networks
-Best practices customers should employ moving forward with cloud migration
-What happens behind the scenes of SteelConnect’s one-click button

Question has a verified solution.

If you are experiencing a similar issue, please ask a related question

Computer science students often experience many of the same frustrations when going through their engineering courses. This article presents seven tips I found useful when completing a bachelors and masters degree in computing which I believe may he…
Make the most of your online learning experience.
Six Sigma Control Plans
I've attached the XLSM Excel spreadsheet I used in the video and also text files containing the macros used below. https://filedb.experts-exchange.com/incoming/2017/03_w12/1151775/Permutations.txt https://filedb.experts-exchange.com/incoming/201…
Suggested Courses

762 members asked questions and received personalized solutions in the past 7 days.

Join the community of 500,000 technology professionals and ask your questions.

Join & Ask a Question