annual percentage rate: meaning, definition, pronunciation and examples
C1Financial, Technical, Business
Quick answer
What does “annual percentage rate” mean?
The yearly interest rate charged on a loan or earned on an investment, expressed as a percentage, which includes fees and other costs.
Audio
Pronunciation
Definition
Meaning and Definition
The yearly interest rate charged on a loan or earned on an investment, expressed as a percentage, which includes fees and other costs.
A standardized measure of the cost of borrowing or the yield on an investment, designed to allow comparison between different financial products, factoring in interest, fees, and the timing of payments over a one-year period.
Dialectal Variation
British vs American Usage
Differences
The term and its abbreviation (APR) are used identically in both varieties. Legal calculation methods may vary slightly by jurisdiction, but the term is the same.
Connotations
Neutral technical term. Associated with consumer finance, mortgages, credit cards, and regulatory compliance.
Frequency
Equally common in both UK and US contexts due to its legal and financial nature.
Grammar
How to Use “annual percentage rate” in a Sentence
The [loan] has an APR of [number]%The [bank] offers a [adjective] APRCompare the APRs before you [verb]The APR includes [fees]Vocabulary
Collocations
Examples
Examples of “annual percentage rate” in a Sentence
adjective
British English
- APR calculations are mandatory.
- The APR figure was prominently displayed.
American English
- APR disclosures are required by law.
- The APR information is on page three.
Usage
Meaning in Context
Business
Standard term in loan agreements, credit card statements, and mortgage offers to disclose the cost of borrowing.
Academic
Used in economics and finance papers to analyze lending markets and consumer behavior.
Everyday
Used when discussing personal finance options like car loans, credit cards, or mortgages.
Technical
Precisely defined by regulatory bodies (e.g., FCA in UK, CFPB in US) with specific calculation formulas.
Vocabulary
Synonyms of “annual percentage rate”
Strong
Neutral
Weak
Vocabulary
Antonyms of “annual percentage rate”
Watch out
Common Mistakes When Using “annual percentage rate”
- Confusing APR with the simple interest rate.
- Thinking a '0% APR' offer means no fees at all (there may be other charges).
- Using 'annual percentage rate' as a plural (it's singular: 'The annual percentage rate is...').
FAQ
Frequently Asked Questions
No. The interest rate is just the cost of borrowing the principal. APR includes the interest rate plus certain fees and costs, providing a more complete picture of the yearly cost.
It typically means you are charged no interest (and no included fees) for a specified introductory period. Always check the terms, as other charges may apply, and the rate will increase after the promotion ends.
You often see a 'purchase APR' for regular spending and a different, usually higher, 'cash advance APR' for withdrawing cash. They are separate products with different costs.
Generally, yes, as it means a lower cost of borrowing. However, you must also consider the loan term, fixed vs. variable rates, and any penalties. The lowest APR product is usually the cheapest overall.
The yearly interest rate charged on a loan or earned on an investment, expressed as a percentage, which includes fees and other costs.
Annual percentage rate is usually financial, technical, business in register.
Annual percentage rate: in British English it is pronounced /ˌæn.ju.əl pəˈsen.tɪdʒ ˌreɪt/, and in American English it is pronounced /ˌæn.ju.əl pərˈsen.t̬ɪdʒ ˌreɪt/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “The devil is in the APR”
- “Read the small print for the APR”
Learning
Memory Aids
Mnemonic
APR = All Payments Revealed. It reveals the true yearly cost, not just the simple interest.
Conceptual Metaphor
PRICE TAG FOR MONEY (It's the sticker price for renting money over a year).
Practice
Quiz
What does the Annual Percentage Rate (APR) typically include that a simple interest rate might not?