What does APR stand for in the context of credit?

APR stands for Annual Percentage Rate in the context of credit. This term is a critical component in understanding the cost of borrowing. The APR represents the total yearly cost of a loan expressed as a percentage of the loan amount. It includes not only the interest rate but also any additional fees or costs that may be associated with obtaining the loan. This comprehensive measure allows borrowers to compare the costs of different loan offers and make informed financial decisions.

Understanding APR is vital when evaluating credit options because it provides a clear picture of what a borrower will pay over the course of a year. This is particularly important for loans and credit cards where interest can accumulate and additional fees may apply. By focusing on APR, consumers can better assess the affordability of the credit they are considering and manage their finances effectively.