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 individuals seeking help from the credit counselors have been paying loans either to pay for a car they acquired on loan or to pay for mortgage in case they acquired their home through a mortgage loan but not everyone understands the calculations that lead to the figures they are paying monthly. APR on a credit card is used to determine the amount that one has to pay monthly to the lender to cover minimum charges and also the interest that the credit card attracts. The total amount that one has to pays to the institutions depend on their outstanding balance one pay off each month and if one made minimum payments or additional payments to clear the balance. The APR calculator does not calculate one’s monthly bill, and each credit card has specific charges. To avoid consumer exploitation by the lending institutions, the loan rates are usually regulated, and banks are compelled to disclose their rates to their customers.
When calculating APR one multiplies the number of payments annually with the payment period. Using an example of 9.5 percent APR it is divided by 12 which gives 0.79 percent monthly interest rate on one’s outstanding balance. 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. The clients ought to be given the figures and facts of the loan agreement by the lenders before they sign the loan agreement. 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.
The investors also use compounding interest as well as APR calculator to determine the returns from an investment.A Brief History of Funds