What is APR?

We'll tell you what the Annual Percentage Rate is and the role it plays in a loan
APR (the Annual Percentage Rate or Annual Effective Rate) is the interest rate that indicates the cost or effective yield of a product. It is used as a reference interest rate to homogenise different types and conditions of loan and credit operations when there are different settlement periods, expenses, fees, etc.
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The Annual Percentage Rate is presented as a percentage and is calculated in accordance with a normalised mathematical formula, which takes the operation's nominal interest rate into account, as well as the frequency of payments (monthly, quarterly, etc.), bank fees and some operation expenses.
In the case of variable interest loans or credit operations, the evolution of the interest rate is unknown, so the APR is calculated assuming that the interest rate will remain at the same value as that of the time of the calculation. In these cases, the expression used by institutions is 'Variable APR', and the institution must indicate that it is just for informative purposes, and that it will vary with interest rate reviews.
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