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Situation: Annual percentage rate

Business & Finance
Tutor: None Selected Time limit: 0 Hours

Potential homeowners are often confused why the annual percentage rate is higher than the quoted interest rate.  Why are the two rates different?  What can change the APR?  How is the truth in lending related to APR?

Aug 7th, 2014

Annual percentage rate is the interest paid per month multiplied by 12 (because it is a yearly rate).

There is a prime APR rate for people with the best credit and it is dependent on the economy and the US treasury bond interest rates, etc. The APR rate a person receives will be dependent on their credit risk and ability to pay back a loan as well as the risk of default.

Truth in Lending is an act that calls for disclosure of the actual costs of a loan by the lender to the recipient of the loan. Essentially, the act looks to maintain maximum transparency in the loan process, to ensure Americans are fully conscious of the agreements they are getting into.

Aug 7th, 2014

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