What is the difference between APR and APY?

APR represents the yearly rate charged for borrowing money. It includes fees but not including compounding. APY refers to how much interest you'll earn on savings and it takes compounding into account. The difference between APR and APY increases as interest is compounded more frequently. Banks and investment companies generally advertise the APY.

What does Apr mean on a loan?

The annual percentage rate, most commonly referred to as APR, is the interest you will pay annually on a loan. APR could be for a mortgage, car payment or credit card. What is APY (annual percentage yield)? Whereas APR is used for the interest you owe on loans, annual percentage yield, or APY, is used for the interest earned on savings over a year.

What is an APY & how does it work?

Sometimes referred to as an earned annual rate (or EAR), an APY is commonly used by banks and investors to state the total rate of return you’ll receive on savings and deposit accounts. In this case, you are the “lender” and the APY lets you know how much interest your money is earning. Unlike APR, APY takes compound interest into account.