Featured Articles
Understanding APR vs. Interest Rate
Posted on June 15, 2023 | 8 min read
When shopping for loans or credit cards, you'll encounter two key terms: interest rate and APR (Annual Percentage Rate). While they're related, they're not the same thing, and understanding the difference can save you money.
What is Interest Rate?
The interest rate is the cost you pay each year to borrow money, expressed as a percentage. It doesn't include any fees or charges associated with the loan. For example, if you borrow $10,000 at a 5% interest rate, you'll pay $500 in interest the first year (assuming simple interest).
What is APR?
APR includes the interest rate plus any additional fees or costs associated with the loan, expressed as a yearly percentage. This might include:
- Origination fees
- Closing costs
- Broker fees
- Discount points
Why APR Matters More
APR gives you a more complete picture of the loan's true cost. Two loans might have the same interest rate but different APRs because of varying fees. The loan with the lower APR will typically cost you less overall.
Pro Tip: Always compare APRs rather than just interest rates when evaluating loan options.
How to Lower Your Credit Card APR
Posted on May 22, 2023 | 6 min read
High credit card APRs can make it difficult to pay down balances. Here are proven strategies to reduce your APR and save money on interest:
1. Negotiate with Your Credit Card Company
Many consumers don't realize that credit card APRs are often negotiable. Call your card issuer and:
- Mention your good payment history (if applicable)
- Cite competing offers with lower rates
- Ask politely for a rate reduction
2. Improve Your Credit Score
Your credit score significantly impacts the APR you're offered. To improve your score:
- Pay all bills on time
- Reduce credit card balances
- Avoid opening new credit accounts unnecessarily
3. Consider Balance Transfer Cards
Many cards offer 0% APR for 12-18 months on balance transfers. This can give you time to pay down debt without accruing interest.
The Impact of Loan Terms on APR
Posted on April 10, 2023 | 7 min read
Loan terms (the length of time you have to repay) significantly affect both your APR and total interest paid. Here's what you need to know:
Shorter Terms Typically Have Lower APRs
Lenders often offer lower APRs for shorter-term loans because:
- There's less risk of default over a shorter period
- The lender gets their money back faster
But Higher Monthly Payments
While shorter terms mean less interest overall, they also mean higher monthly payments. You'll need to balance affordability with total cost.
The Middle Ground
Consider these strategies:
- Choose the shortest term you can comfortably afford
- Look for loans with no prepayment penalties so you can pay early
- Use our APR calculator to compare different term options