Which statement is true about an annual percentage rate (APR)?(1 point)
Responses
It is equal to the interest rate times the principal.
It is reduced every time you make a payment.
It is a simple way to compare all the various elements of different loans.
It is of little interest to the average borrower.
It is a simple way to compare all the various elements of different loans.
The true statement about an annual percentage rate (APR) is that it is a simple way to compare all the various elements of different loans.
The true statement about an annual percentage rate (APR) is:
- It is a simple way to compare all the various elements of different loans.
To understand why this is true, it helps to know what APR represents. The APR is a standardized measure and expression of the total cost of borrowing over a one-year period, including both the interest rate and any applicable fees or charges associated with the loan. It provides borrowers with a common ground to compare different loan offers, ensuring that they can make an informed decision.
For instance, when comparing two loans with different interest rates, the APR takes into account the various fees and charges associated with each loan, giving you a more accurate picture of the overall cost. By considering the APR, borrowers can evaluate loan options while factoring in both the interest rate and additional costs, such as origination fees or closing costs.
Therefore, the statement that the APR is a simple way to compare all the various elements of different loans is true. It allows borrowers to consider the complete cost of borrowing and make an informed decision about the most suitable loan for their needs.