APR stands for Annual Percentage Rate. It is the annual rate charged for borrowing, or the rate made from investing, given as a single percentage number. It represents the yearly cost of borrowing (or investing) over the entire loan term including any fees or other costs that are part of the transaction. It provides borrowers with a number so that they may make comparisons to rates charged by other lending institutions. You will see APR on mortgages, credit cards and loans.
By law, issuers of credit cards and other lenders must provide clients their APRO so that they may fully understand the actual rates. For example, a credit card company may advertise their interest rates on a per-month basis (i.e., 1.3% per month) but must also clearly state the APR (monthly APR x 12 months = 15.60%). Banks typically determine APR by starting with an index such as the U.S. Prime Rate (advertised in the New York Times) and then adding a margin to it. Variations in the APR include personal (what you will actually pay) vs. representative (what is advertised). For mortgages, the advertised APR is what you pay; in other words, you either qualify for the mortgage loan or not. For credit cards and other loans, your APR is usually based at least in part on your FICO score, or credit-worthiness rating. Also, credit cards may charge differing APRs for purchases vs. cash advances, vs. penalty fees vs. introductory offers. Cash advances usually carry a higher APR than purchases.
In short, APR is the interest rate charged on the amount borrowed and thus reflects
the annual cost of borrowing money. The primary advantage to having the APR
provided is that the borrower is that it can help you decide between loan offers
by comparing how expensive transactions are on each.