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# Is the annual percentage rate usually lower than the actual interest rate on the loan?

###### Wiki User

###### 2007-07-20 03:48:59

The actual interest rate on a mortgage will always be higher

than the annual percentage rate unless the borrower keeps the loan

for the full term. Refinancing or selling before the end of the

term results in a much higher actual (effective) interest rate. The

effective rate on a mortgage can be lower than the annual

percentage rate (fixed rate) by paying extra to principal

especially early in the mortgage term.

## Related Questions

###### Asked in Personal Finance, Loans, Money Management

### What a loan is What interest is And how the annual percentage rate measures the true cost of a loan?

What a loan is: A sum of money lent at interest.What interest is: A charge for a loan, usually a percentage of the amount loaned.And how the annual percentage rate measures the true cost of a loan? Annual percentage rate, commonly referred to as APR, is what creditors charge consumers in order to allow them to make installment payments on rather large purchases, such as What_does_the_term_annual_percentage_rate_mean_for_a_loanand homes. Loan types, credit score, report, and history, can all have effects on what APR you can get for a loan.

###### Asked in Interest Rates

### Is the annual interest rate the same as simple interest?

Usually no. Most institutions charge (and pay) compound
interest, NOT simple interest.
Usually no. Most institutions charge (and pay) compound interest,
NOT simple interest.
Usually no. Most institutions charge (and pay) compound interest,
NOT simple interest.
Usually no. Most institutions charge (and pay) compound interest,
NOT simple interest.

###### Asked in Interest Rates

### What is effective interest rate?

An effective interest rate is an actual amount of interest that
is paid on a loan or investment vehicle. It differs from the Annual
Percentage Rate.It takes into account the concept of compound
interest.It is commonly used to calculate the total amount that
will accumulate or will need to be repaid on bank accounts or when
repaying revolving credit card accounts.

###### Asked in Credit and Debit Cards, Home Equity and Refinancing, Small Business Loans, Acronyms & Abbreviations

### What does APR stand for?

Usually it stands for Annual Percentage Rate (used to calculate
the amount of interest charged on the balance of a credit card or
loan). If that doen't make sense in relation to where you saw it
then it may stand for something else. Also: The nominal rate of
interest is the rate used when calculating the interest expense on
your loan. That's what most people consider to be the interest rate
on their loan. The annual percentage rate (APR) on a loan includes
some of the costs involved in procuring the loan and is meant to
provide the consumer with an effective rate to use when comparing
loans.