What is APR?
Annual Percentage Rate (APR) is the annual rate charged for borrowing and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.
APR Calculator
Monthly payments:
$0.00
This loan will really cost you:
$0.00
Why is APR important in Furniture Financing?
When you’re financing your furniture, understanding the APR is crucial. It gives you a comprehensive picture of how much your financing deal will cost you per year, beyond just the sticker price of the furniture.
How to Use the APR Calculator
- Enter the Loan Amount: Input the total amount of loan you are planning to borrow in the ‘Loan Amount’ field.
- Input the Interest Rate per Year: Enter the annual interest rate that is applicable on the loan in the ‘Interest Rate per Year’ field. The interest rate should be entered as a percentage (for example, 5 for 5%).
- Specify the Loan Term in Years: In the ‘Loan Term in Years’ field, specify the duration in years over which you plan to repay the loan.
- Calculate: Once all the necessary information has been entered, click on the ‘Calculate’ button. The calculator will then provide you with your monthly payments and total cost of the loan in the ‘Monthly Payments’ and ‘This Loan Will Really Cost You’ fields respectively.
Remember, the lower the APR, the less you are likely to pay back over the life of the loan. Use this calculator as a tool to better understand your loan and to negotiate better terms if necessary.
How is APR calculated?
The Annual Percentage Rate (APR) is calculated by taking into account not only the interest rate but also any additional fees and charges associated with the loan. The formula for calculating APR is as follows
where:
- Interest = Total interest paid over the life of the loan
- Principal = Loan amount
- n = Number of days in the loan term
Types of APRs
There are several types of APRs, including but not limited to:
- Introductory APRs: These are temporary rates offered by credit card companies to attract new customers. They usually last from 6 to 21 months after which the APR increases to the regular rate.
- Regular APRs: This is the long-term rate that applies after the introductory rate period ends.
- Fixed APRs: These APRs do not change over time.
- Variable APRs: These APRs are tied to an index interest rate and can change with market conditions.
- Cash Advance APRs: These are often higher than the regular APR and may apply when you borrow cash against your credit line.
Difference between APR and Interest Rate
The interest rate is the cost of borrowing the principal loan amount, expressed as a percentage. It does not include all fees you’ll pay for the loan. On the other hand, the APR is the annual cost of the loan, including fees, and reflects the true cost of borrowing. This is why the APR is often higher than the interest rate.
Conclusion
Understanding your APR is key to making informed decisions about furniture financing. Use our APR calculator to help navigate your furniture financing options. Remember, a lower APR means lower costs to you, so always aim for the lowest APR you can qualify for.
If your planning to finance your furniture do Visit our blog to read our informative and engaging articles to take more informed decision. We share tips, tools, case studies, and best practices on how to use furniture financing wisely.