Annual Percentage Rate

APR, an acronym for the term  Annual Percentage Rate is a tool that consumers can use to better understand the finance offers they are reviewing. APR is often a term that is referred to in most finance contracts such as a credit card, auto or mortgage loan. This is a good way to compare the offer terms to ensure you are receiving the most favorable lending terms. Consumers who are shopping for a mortgage loans will want to ask to see a document called the truth in lending statement, this is the document for a mortgage where the APR is disclosed. The apr is used as a calculation to illustrate to a borrower the cost of borrowing money over the loan term including the borrowers closing fees (for a mortgage or loan that includes fees from the lender). If a loan has an APR that equals the interest rate of the mortgage, then this represents a loan with zero closing costs. If you are applying for a mortgage and the APR is higher than the mortgage interest rate (on a fixed rate mortgage loan) this should disclose to a borrower that they are paying closing fees. Assuming that a borrower is shopping and comparing mortgage offers, APR can help to guide a borrower in understanding the effect of the mortgage fees and true cost of borrowing money over an extended period of time. In some cases, having a higher APR may not be a bad thing as a consumer may be paying points to secure a lower rate mortgage. It is important to distinguish that a loans apr is not used to calculate the repayment, this is strictly based on the loans interest rate. Consumers often make the mistake of shopping strictly based on interest rate and not taking into consideration the loans total closing fees. Utilizing the APR disclosure can only help in trying to find the best overall mortgage offer.