What is interest?

Interest is the money a borrower reimburses to the lender for borrowing money. The interest is the amount a lender acquires for lending money.


What is an interest rate?

The interest rate entails the percentage the lender entrusts on the loan amount as interest.


What is an APR?

APR (annual percentage rate) equates to the interest rate affixed to specific fees that have been connected to or rebates advanced by the lender that have been subtracted. Generally settled up front, the APR disperses the fees and rebates out upon the activity of the loan. It presents the borrower the actual cost of a loan and can be correlated to other loans.


Example comparing two 30-year loans with the same interest rates:

Loan Interest RateFeesAPR

Loan A5%$30005.269%

Loan B5%$20005.178%

In this example, Loan A has a larger lifetime cost.


Example comparing two 30-year loans with different interest rates and fees:

LoanInterest RateFeesAPR

Loan A5.2%$25005.426%

Loan B5.3%$20005.482%

In this example, Loan B has the larger lifetime cost.


Should I consider only the APR when comparing loans?

No. The APR is accounted under the pretense that an individual will remain in that home for the life of the loan, which most people end up relinquishing. Receive advisement from your lender what the APR would be if the loan has a lifetime of 5, 7, 10 and 15 years.

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Hanu Reddy Realty

Hanu Reddy Realty

16251 Laguna Canyon Rd. #100
Irvine  California 92618

Office: 949-450-8800 CA BRE Lic. 00873745 Email: info@hanureddyrealty.com

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