What does APR stand for in financial terms?

APR stands for Annual Percentage Rate, which is a critical term in financial contexts. It represents the annual cost of borrowing or the annual return on investment expressed as a percentage. This rate includes not only the interest charged on the loan, but also other fees and costs associated with the transaction, providing borrowers and investors a clearer picture of what they will ultimately pay or earn over the course of a year.

The significance of APR is particularly prominent in lending practices, where it allows consumers to compare different loan offers by standardizing the costs. Understanding APR is essential for making informed financial decisions regarding loans, credit cards, and mortgages, ensuring that individuals can assess the total expenses of borrowing and the implications of varying interest rates and fees.