A standardized way to express borrowing cost over a year, including interest and certain fees.
For example, two lenders both offer a $50,000 loan at 8% interest, but Lender A has an APR of 9.2% due to origination fees, while Lender B's APR is 8.5% — making Lender B the better deal despite identical interest rates.
Why it matters: It reveals the true, total cost of borrowing by including both the interest rate and mandatory fees, allowing for accurate loan comparisons.
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