Interest is the money that you pay to a lender to borrow money. For example, let's say you borrow $100 and agree to pay back $120. That's $20 extra you're paying the lender. This extra amount is the loan's interest, which is expressed as a percentage of the amount borrowed. In this example, the percentage rate is 20%. However, to really understand the cost of borrowing money, you also need to know the period of time over which the rate is calculated. Most interest rates are calculated for a period of one year, which is expressed as the loan's Annual Percentage Rate or APR.
Use our APR calculator below. The fields have been pre-populated with values from the example in the video, but feel free to change them.