What does APR stand for in the context of loans?

APR stands for Annual Percentage Rate, which is a critical term in the context of loans and credit. It represents the yearly interest rate charged for borrowing or earned through an investment, expressed as a percentage. This rate is important because it provides borrowers with a means to understand the true cost of a loan. It includes not only the interest on the loan but also any other fees or costs that might be associated with borrowing, making it a comprehensive measure.

By using APR, consumers can compare different loan offers more effectively, as it offers a standardized way to look at the costs involved. This allows individuals to assess their borrowing options more clearly, ensuring they make informed financial decisions. Understanding APR is essential for managing debt responsibly, as it can significantly affect overall financial health.