Which statement best describes APR as used by lenders?

Which statement best describes APR as used by lenders?

• A. Annual Interest Rate
• B. Annual Percentage Rate
• C. Amortized Percentage Rate
• D. Actual Percentage Rate

Answer: (B)

APR is the annual cost of borrowing expressed as a single percentage. It standardises the true price of a loan by including interest and certain fees, so you can compare offers from different lenders on an apples-to-apples basis. This makes it the best description of how lenders present borrowing costs. The annual interest rate alone would miss fees, and terms like amortized or actual percentage rate aren’t the standard way lenders describe the cost.

APR is the annual cost of borrowing expressed as a single percentage. It standardises the true price of a loan by including interest and certain fees, so you can compare offers from different lenders on an apples-to-apples basis. This makes it the best description of how lenders present borrowing costs. The annual interest rate alone would miss fees, and terms like amortized or actual percentage rate aren’t the standard way lenders describe the cost.