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These lenders may not always act in the best interest of the client. APR refers to annual percentage rate and it specifically is defined as the cumulative interest of bank loan over an annual or yearly basis. The annual percentage rate is calculated annually, rather than as a monthly fee, which is commonly associated with other accessory contracts.
Nominal annual percentage rate refers to the simple interest rate for a year.
Effective annual percentage rate refers to the compound interest rate over one year. The monthly payment rate for a mortgage is made up of two different components.
These components each have their own surcharge. The actual amount of money from each payment that is applied toward the amount being borrowed is referred to as the principle. This is because this is the principle amount that composes the loan. Lenders exist in order to profit from the exchange of money.
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