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How APR Affects A Loan With Compounded Interest. According to statistics and analysts one of the major reason behind the success of most lending institutions as well as different investors is their ability to collect money from compound interests on loans or investments they make and such funds had big influence on the industry. When one is working in the banking industry, or one is interested in cash from a lending institution they are likely to come up against a commonly used term, APR, which is the abbreviated form of annual percentage rate but most individuals do not know how to come up with the figures. Most people are in debt situations either due to mortgages or due to loans which most people take when purchasing cars. Most people have also acquired credit cards from their banking institutions but there is need to pay attention when one is seeking to acquire one should compare interests that a card will attract using the APR calculator. Annual percentage rate is defined as the amount of interest that one has to pay annually to a lending institution depending on the outstanding balance. The two main kinds of interest rates charged by most lending institutions to the borrowers are the fixed interest rates and variable interest rates. If according to the loan agreement the borrower is paying the loan in a fixed interest rate, they pay the same amount in every installment throughout the repayment period but if the borrower and the lender agreed to variable interest rates the value of installments may either increase or decrease during the repayment period. One needs to be keen on signing any loan agreement and discuss all areas affecting the amount they pay to the lending institution as interest. The borrower ought to be provided with key figures an facts about their loans by the lender which allows them to make informed decisions. One should look to discuss the additional cost resulting from the loan such as payment protection insurance fees though to some institutions the fee is optional. An individual seeking a loan from a financial institution also needs to discuss the loan repayment period length as well as amount they will have to pay monthly as installments. To protect the clients from over-exploitation from the banks; different policies have been formulated. When one is calculating the amount they pay monthly as interests from a loan with a set APR, one multiplies the principal amount with the rates and divide by the number of months in a year, 12. Taking an instance where a bank has set their rates at 12 percent , and one has an outstanding balance of 1000, to determine the value that one pays in the month one multiplies the rate with outstanding balance, which results to 120, which is divided with 12, meaning the client pays at a monthly rate of one percent and during the month they paid 10 shillings as interest.Getting Down To Basics with Funds