APR (annual percentage rate)

How does APR (annual percentage rate) allow consumers to compare loans?

Say, an individual plans on buying a new car The individual will finance the full $30,000 purchase Two dealer offers two loan terms

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The individual has a 4% interest rate over 72 months Here, the dealer charges a special $1,000 fee which gets included in the loan so you finance $31,000 The dealer says this relates to the special financing and no problem as it does actually relate to special financing The APR for this loan equals 513%

For the next, option you can get a 5% loan with no special financing charge having a APR of 5%

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