APR and Debt Consolidation Refinancing

By Karen Lawson
LoanPage.com Columnist

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If you're considering refinancing for debt consolidation, the APR on your consumer debt is an important term to understand. APR, or annual percentage rate, is the federally required calculation of your rate including all finance charges associated with a loan or credit card account. The APR appears on every monthly statement you receive from creditors.

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What's the Difference Between APR and Interest Rates?

Traditionally, consumers pay close attention to interest rates when applying for credit. Unfortunately, interest rates may not be the only finance charges associated with credit accounts. There can also be fees and charges such as membership or annual fees, late fees, and over limit fees. These can add up quickly, especially if you've been struggling with your finances and have made late payments. The interest rates shown on credit account statements are the annual rates you are charged for the balance owed. The APR includes the interest rate and all other costs associated with a credit account. The APR provides a more accurate picture of what you're paying for credit.

When shopping for refinancing, it's a good idea to compare APRs. As with consumer credit, your mortgage lender charges interest and other fees for refinancing your mortgage. Comparing the APR for refinancing options can help you minimize the costs of financing for your mortgage and consumer credit accounts. This is an important step in gaining control of your household budget and organizing your finances.

About the Author
Karen Lawson is a freelance writer with extensive experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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