APR- What is the true cost of borrowing money?
Annual Percentage Rate represents the price that you pay to borrow money- And you want this rate to be as LOW as possible. If you have ever applied for credit (credit cards, a car loan or mortgage) you probably seen the term APR.
Getting a true understanding of APR can truly help you make more sound, financial & credit decisions because it will give you a good idea of how much it will cost you to borrow money. So you might be wondering, "So does APR exactly work?" and the answer will determine how much of your income you will get to keep monthly.
Say for instance we are speaking of credit cards specifically, and you carry a balance from month to month. Credit card companies will give you a grace period to make new purchases and if you pay this balance off completely, you will not be charged any interest. However if you don't, you'll be charged, based on the APR for the unpaid portion.
And please don't get Annual Percentage Rate and Annual Percentage Yield confused- One is the charge for borrowing money and the other is the rate of payment you receive for letting your money grow. And ultimately, the better your personal credit score is, the better and less expensive it will be for you to borrow money.