What is APR, APY and Interest?

Being a part of the banking and finance industry, APR, APY, and Interest play a very important role. Consumers should know about these terms because if consumers are unaware of them, they affect them badly.

To save themselves from any fraud or mishandling of funds, consumers should completely understand how much amount they are paying to their creditors on the borrowed funds.

The complete knowledge and understanding of industry terms will be beneficial for the consumer, and it will help the consumer carefully handle the funds and make wise decisions.

A perception is that sits best for financial problems as well is “knowledge is power.” Following are the details of APR, APY, and interest that are charged on the average consumer.

What are APR, APY, and Interest?

Following are the main banking terms;




  • The amount that a borrower has to pay on payments when borrowed by a loan or through a credit card. Interest increases the total amount that the borrower owes over a certain period.
  • Lenders set interest rates, and it is some percentage of the actual amount that the borrowers borrow from the lender and agreed to pay.
  • The interest rate may be changed from one borrower to another borrower.
  • Interest is also the amount of money we get on our savings, shares, or other financial funds. Suppose we keep our money in a saving account. In that case, the financial institution holding our money invests our funds in certain businesses and gives us some of the revenue generated from the investment of our funds.

Annual Percentage Rate (APR)

  • APR or annual percentage rate plays an important role while taking a credit card or any other type of financing.
  • It can directly affect the amount of money that you have in your account or that you spend from your account.
  •  The amounts that you have to pay annually in the form of interest. Credit comes with certain charges that you must pay off on time; otherwise, you have to pay a certain penalty on late payments. These charges can lead you to pay more than the amount you were initially owed.
  •  May also vary like interest rates, and to deal with it, search the market carefully and select the lowest APR to make wise financial decisions.


  • It is an important financial tool that determines how much earnings can be generated from the deposit. A consumer can compare the investments by this standard method.
  •  The amounts that you will get on the deposit yearly. Always search for the financial institution that will give you high APY because you will earn it. It is beneficial because it is your earning over other earnings and is called compounding.
  • It is the original amount that you collect in interest on your money deposits.

All these APR, APY, and Interest

are the banking terms on which creditors and Lenders earn their earnings on the basis of proper interest rates.

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