2. Interest Rate Versus APR

Look at your loan documentation, and you will find the APR listed beside the interest rate. The Annual Percentage Rate is different from the interest rate. It includes fees, such as loan establishment fees, loan discharge fees, and account administration fees, as well as the interest charges. Establishment and discharge fees are not charged every year but only at the beginning and end of the loan. The APR averages out all the costs of the loan and provides an annual rate. When you compare the interest rate and the Annual Percentage Rate, pay attention to how similar or different the two rates are. A big variation indicates the loan includes numerous "junk fees."

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