What does APR stand for?

Annual Percentage Rate (APR) is a critical concept in personal finance, as it represents the yearly cost of borrowing money expressed as a percentage of the loan amount. This figure includes not only the interest rate charged on the loan but also any additional fees and costs that might be incurred over the year.

APR is particularly important because it allows consumers to compare different loan offers more effectively. By providing a standardized measure, individuals can determine the true cost of borrowing, making informed decisions about loans like mortgages, credit cards, and personal loans. Understanding APR helps borrowers see beyond just the interest rate and factor in all expenses associated with a loan.

In contrast, terms like Annual Payment Ratio, Average Payment Rate, and Adjusted Price Rate do not encapsulate the full financial implications of borrowing and do not have a recognized place in financial management as a term to define cost. Hence, the focused definition and importance of APR make it the correct answer.