Annual Percentage Rate Key Terms

Use annual percentage rate key terms to help you secure a low interest loan

If you are in charge of securing loans for your business, then you better have a good background in annual percentage rates if you don't want to end up getting a high interest rate loan that sandbags your company's finances. Knowing some annual percentage rate key terms and how to calculate the annual percentage rate can help you locate low interest loans that will give your company the financial freedom you are looking for.

Fixed annual percentage rate

A fixed annual percentage rate is an annual percentage rate that will not change even if the prime rate increases. However, if you default on your credit card or loan, the bank can raise your fixed rate, because you will have defaulted on your agreement of payback terms.

Variable annual percentage rate

A variable annual percentage rate is a rate that will change based on the prime rate. Depending on the prime rate, this type of annual percentage rate can either go up or down.
Federal Reserve Board. While there, spend some time reading their helpful articles on annual percentage rates.

Interest rate

The interest rate is the percent rate that the lender will charge you for borrowing money from them. The interest rate is part of the calculation of the annual percentage rate.

Default annual percentage rate

The default annual percentage rate is the rate that will be assigned to you by the lending agency if you fail to make payments on time. The default annual percentage rate is much higher than the original rate on loans and credit cards.

Prime rate

The prime rate is the rate that banks charge their customers who have the best credit. Prime rate is not the same at every bank and it does change based on what the Federal Reserve Bank does to the Federal Funds Rate.

APR calculation

The APR calculation, or annual percentage rate calculation, is a handy term to know. This will help you calculate the annual APR for any credit card or loan you consider applying for. The calculation is the interest rate plus any extra fees or costs that the lender is going to attach.