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Why You Need To Calculate APR Rates Before Signing A Loan Agreement When clients seek services of a credit counselor one of the often asked questions is the explanation of APR and the how one can come up with the figure, but APR or annual percentage rate is the amount that one pays an interest on loans from a lending institution or when they use credit cards. In most cases one finds themselves in a debt situation if they acquired a car through a loan if they used mortgage when purchasing a home but they fail to understand the amounts they pay as interest charges by failing to understand how to calculate them. The APR on a credit card determines the amount that one has to pay to the lender to cover minimum charges and the interest on the credit card. The amount of money one pays at the end of a particular month also depends on whether one has been paying the minimum payments or they have been paying additional charges to reduce their outstanding balance. Figures arrived at using the APR does not imply one’s monthly bill for a specific month but the interest that one pays while each credit card has specific charges depending on the lending institution. There are set regulations which control the APR rates charged by different lending institutions which aim at protecting customers from over-exploitation. To calculate the amount one pays as the APR to a lending institution one multiplies the number of payments annually with the rate of payment. By using an example of a lending institution which has set its APR rates at 9.5 percent we divide the value by the number of months, 12, which gives us 0.79 percent representing the rate per month that one is charged on the outstanding balance. Using an example of an individual who took 10000 as the loan amount in the lending institution, they are required to pay 79 per month as the interest charges. For loans acquired on compounding rates basis, balances from the previous months also add to the outstanding balance. Before one signs the loan agreement they should also inquire about other essential factors such as the length of payment, and the mode of payment as much as they are required to verify the rates. It is also vital that one discusses the additional fees such as payment protection insurance before signing the agreement. The lenders should present a client with the all the facts and figures before they sign the agreement including the APR to allow the clients to make an informed decision. One also needs to determine whether the APR is fixed or variable where with variable they pay amounts of money in increasing or decreasing order while for fixed rates the amount remains constant. Investors also use compounding interest in relevant investment decisions.News For This Month: Funds

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