What is AER and APR?

Answer 1

Annual Equivalent Rate (AER) is the interest that is calculated under the assumption that any interest paid is combined with the original balance and the next interest payment will be based on the slightly higher account balance. Overall, this means that interest can be compounded several times in a year depending on the number of times that interest payments are made.

In the United Kingdom, the amount of interest received from savings accounts is listed in AER form. For example, a savings account with a quoted interest rate of 10% that pays interest quarterly would have an annual equivalent rate of 10.38%. Investors should be aware that the annual equivalent rate will typically be higher than the actual annual rate calculated without compounding.

Annual Percentage Rate (APR) is the annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.

Loans or credit agreements can vary in terms of interest-rate structure, transaction fees, late penalties and other factors. A standardized computation such as the APR provides borrowers with a bottom-line number they can easily compare to rates charged by other potential lenders.

By law, credit card companies and loan issuers must show customers the APR to facilitate a clear understanding of the actual rates applicable to their agreements. Credit card companies are allowed advertise interest rates on a monthly basis (e.g. 2% per month), but are also required to clearly state the APR to customers before any agreement is signed. For example, a credit card company might charge 1% a month, but the APR is 1% x 12 months = 12%.

Answer 2

APR (annual proportion cost) is the each year cost of interest payable on mortgages, loans, credit enjoying cards and different credit products. it incredibly is regularly used to permit debtors to evaluation diverse credit can provide because of the fact it not in basic terms incorporates the appropriate interest cost, yet additionally any expenditures in contact, inclusive of association expenditures. this means, as an occasion, a private loan with an interest cost of five% would have an APR of five.5% as quickly as the different expenses are taken under consideration. AER (annual equivalent cost, however from time to time common because of the fact the each year valuable cost) is ordinary in decrease cost rates money owed. It explains what cost of interest you will earn reckoning on how commonly interest is further on your account. as an occasion, an account that accumulates interest month-to-month would have a decrease interest cost than one which will pay consistent with annum because of the fact the month-to-month account will make the main of compound interest greater quickly. however, they'd the two have the comparable AER. in this way, AER helps assessment between decrease cost rates money owed that pay interest at diverse periods in the comparable way that APR helps assessment between loans with diverse expenditures of interest and expenditures. AER does not contain expenses and expenditures because of the fact there commonly are no linked with decrease cost rates money owed.

Answer 3

Aeropostle and April. lol