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The real cost that you pay to borrow, stated as a yearly percentage of the loan amount. This is sometimes called your effective borrowing cost. For mortgage loans, closing costs and discount points are added to calculate APR. For example, if you pay $500 in closing costs to obtain a $10,000 loan, the APR will be higher than the interest rate since you are effectively borrowing $9,500 but will owe $10,000. The Federal Truth in Lending Act requires the lender to disclose the APR to you.
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