Annual Percentage Rate Key Terms

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

By Meredith Fagioli

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.
Try: At Evolution Finance, you can learn more about fixed annual percentage rates and how they differ from variable annual percentage rates.

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.
Try: You can learn more about variable annual percentage rates at the 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.
Try: Quicken Loans has an article that can help you differentiate between the interest rate and 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.
Try: At Consumer Education Services, you can learn more about the default annual percentage rate along with other tips to keep you out of debt and what to do if you get into debt.

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.
Try: MoneyCafe.com has more information on prime rates and provides a chart of prime rates over time.

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.
Try: At Debt Consolidation Care, you can find a wealth of information on calculating the annual percentage rate of a loan or a credit card agreement.