Annual Percentage Rate basically is a term of the effective interest rate which will be paid on loan taken. In simple terms APR basically is the entire cost of credit to the customer as a yearly percentage of the amount of credit approved.

APR is proposed to make it easier to evaluate lenders and load options. APR is expected to vary from the "note rate" or "headline rate" publicized by the lender. In countries like America and England, lenders are required to reveal the APR prior to the loan being finalized.

APR is an expression applied in connection to deposit account as well. On the other hand, when dealing with deposit accounts, Annual Percentage Yield or APY is the figure to be quoted to customers for assessment purposes.