BANKS MENTION APR; WHY DON'T THEY PROVIDE EFFECTIVE RATE ALSO?

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BANKS MENTION APR; WHY DON’T THEY PROVIDE EFFECTIVE RATE ALSO?


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Federally regulated lending disclosures require lenders prominently display the actual interest rate and APR. Not sure what more you want, “effective rate” is not a term widely used in the lending industry.

updated 12 months ago
Ted Rood
1257 6
Answered about 1 year ago
Ted Rood
1257 6

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The APR includes all the cost of the mortgage including points and closing costs. The interest rate is the starting interest rate for the mortgage and does not reflect the actual cost of your loan.

Due to transactions costs and fees, the APR is always higher than the nominal interest rate. Therefore, APR represents the “true cost” to the borrower, and is a better measure of the cost of borrowing.

Reference: http://www.diffen.com/difference/AnnualPercentageRatevsInterest_Rate

Answered 12 months ago

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