Glossary
APR
Annual percentage rate — the interest rate plus mandatory fees, expressed as one yearly cost. The only honest way to compare two loan offers.
APR folds the interest rate together with origination fees and other mandatory charges into a single annualized number, which is why it is almost always a little higher than the quoted rate. Because lenders must calculate it the same way, APR lets you line up two offers with different fee structures and see which is genuinely cheaper. The one place it misleads is short-term products like payday loans, where a small flat fee annualizes into a triple-digit APR.
Related terms
- FICO score The most widely used credit-scoring model among lenders, built by Fair Isaac Corporation — often used interchangeably with "credit score," though VantageScore is a common alternative.
- Amortization The schedule that splits each payment between interest and principal. Early payments are mostly interest; the balance flips near the end of the term.
- Short sale Selling a home for less than what is owed on the mortgage, with the lender's approval — an alternative to foreclosure.
- Secured A loan backed by an asset the lender can seize if you default — a house, a car, or a deposit.
- Hard inquiry A credit check triggered by a real application, which can cost a few points and stays on your report for two years.
- PMI Private mortgage insurance — a monthly premium that protects the lender, not you, when your down payment is under 20%.