How can I compare loans?Often lenders will advertise or quote an effective rate of interest. This may be called the "note rate" or "headline rate." A loan with a lower effective rate of interest does mean that the loan costs you less. There are usually fees and other costs associated with a loan that are not included in the effective rate.One of the best measures to compare loans is to determine the amount on money you actually receive from the loan to the total amount of the payments you are required to make. This is what the Annual Percentage Rate (APR) does. The APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare different loan options. The APR does not reflect the cost of pre-payment penalties, late fees, NSF fees, etc. Be sure to ask a lender about these costs too. |
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