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Interest Rate is the amount charged the borrower for use of the money over the term of the loan. Interest rate is usually stated in terms of an annual percentage. It is the interest rate, term and principal amount that determines the monthly payment on a loan. For example, a one year loan of $100 at 10% would require interest payments of $10.
Interest rate is often confused with annual percentage rate or APR. The APR can be used to compare the total cost of a loan because it takes into consideration fees and mortgage points as well as the interest rate on the loan. This relationship can be simply state as follows:
APR = Interest Rate + Fees + Points
Other forms of this term include - interest rates |
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