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APRPhonetics: n/a Function: noun The APR is different from the rate. Everyone we've talked to has a different way of understanding this concept. Here is the clearest way we've come across: The APR is the annual percentage relationship between the payments and the amount borrowed, minus the fees. This rate is often used to compare the different loans borrowers have to choose from. The APR is almost always higher than the rate. The rate, on the other hand, is a monthly percentage relationship between the payments and the total amount borrowed, including fees.
Example: If you borrowed $100,000, your fees were $9,000, and your payments were $1000 per month, your rate would be 12% per year because it is based on 12 payments of $1000 in relation to $100,000. (12 x 1000 = 12,000, and 12,000 divided by 100,000 is .12, or 12%). Your APR would be ABOUT 13% because it is based on 12 payments of $1000 plus the compounded interest on those payments in relation to the $91,000. This is a bit complicated. The TIL also has a line in it regarding prepayment penalties  penalties incurred by the borrower if they decide to pay off the entire loan before the life of the loan has passed. This usually occurs when the borrower pays off the entirety of one loan with a newer loan. This line has several check boxes stating whether or not the loan will, may, or will not have a prepayment penalty. Definition 1: The APR is the annual percentage relationship between the payments and the amount borrowed, minus the fees. Thesaurus / Related Terms Annual Percentage Rate Annual Percentage Yield Rate Truth in Lending Disclosure
