Is APR Important on a Property Tax Loan?

Loans can be a huge source of stress and worry, even without trying to understand all of the industry lingo that’s linked with them.  One of the biggest confusions in this area is the difference between an interest rate and an annual percentage rate, or APR.  While these things appear to be identical at first glance, there are actually a few subtle differences.

The interest rate on a loan refers to the regular charge a lender requires for allowing you to borrow money.  This rate will be completely dependent on the amount of the loan, and comes in the form of a yearly percentage.  For example, if you have borrowed $10,000 at an interest rate of 6% per year, you will be charged $600 of interest.

As the amount owed varies due to payments made, and interest charged, then the total cost of the interest will change.  The rate of 6% will remain the same, but the sum of the 6% will likely change from year to year.  Unfortunately, the interest rate is not the only cost associated with taking out a loan, and that is where APR comes into the picture.

The annual percentage rate of a loan takes the total cost of a loan into consideration.  This includes the interest rate as described above, but also encompasses closing costs, various fees, and points.  Points refer to payments made upfront in order to lower the overall interest rate.  Various fees refer to application fees, insurance, or costs associated with additional services provided by the lender.

In conclusion, interest rates refer to an annual percentage rate that is dependent upon the amount of borrowed money.  One the other hand, APR refers to a percentage of the borrowed money, as well as other costs associated with the loan process.  In order to decide which consumer or property tax loan loan is best for you, you must look at both the APR and the annual interest rate.  This will help you determine which route will be the cheapest overall.