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What Research About Funds Can Teach You

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Calculating Compound Interest And The Use Of APR Calculator One of the most asked questions by clients visiting a credit counselor is the explanation of annual percentage rate, the APR, and how to calculate the same, but APR is simply defined as the amount that one pays as interest on loans or credit cards. Most of the clients find themselves in a debt situation when they acquire cars on loan or mortgage, but most of them fail to understand how the amount arrived at as interest charges were calculated. The APR on a credit card determines the amount that one has to pay to the lender to cover minimum charges and the interest on the credit card. The amount of money one pays at the end of a particular month also depends on whether one has been paying the minimum payments or they have been paying additional charges to reduce their outstanding balance. Figures arrived at using the APR does not imply one’s monthly bill for a specific month but the interest that one pays while each credit card has specific charges depending on the lending institution. There are set regulations which control the APR rates charged by different lending institutions which aim at protecting customers from over-exploitation. To calculate APR, the rate of a payment period is usually multiplied by number of payments annually. Taking an example of a lending institution which has set its APR rate as 9.5 percent, it means one is charged 0.79 percent monthly on the outstanding balance, figure arrived at by dividing 9.5 with 12 which is the number of months per year. If one has a loan of 10000 they are required to pay an interest of 79 per every month using the 9.5 APR. In the case of compounding rates if one had not cleared their balances for the past months, the value increases. Before one signs the loan agreement they should also inquire about other essential factors such as the length of payment, and the mode of payment as much as they are required to verify the rates. It is also vital that one discusses the additional fees such as payment protection insurance before signing the agreement. Lending institutions are required to present the facts and figures to their clients before they sign the loan agreement to allow them to make informed decisions. One also needs to determine whether the APR is fixed or variable where with variable they pay amounts of money in increasing or decreasing order while for fixed rates the amount remains constant. Compounding interests are not only used by lenders, but they are also used by investors when they are returns from an investment.Lessons Learned from Years with Finances

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