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Annual percentage rate

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The terms Annual Percentage Rate and APR and nominal APR and effective APR -- some times abbreviated to EAR -- all describe the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage, credit card, etc.

It is a finance charge expressed as an annual rate.

Those terms have formal, legal definitions in some countries or legal jurisdictions, but in general:

  • The nominal APR is the simple-interest rate (for a year).
  • The effective APR is the fee+compound interest rate (calculated across a year).


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This term or phrase is currently an entry in The SmallBusiness.com Business Glossary WIKI. Please help expand this entry into a more detailed description.