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APR is one of those expressions that bubbles up from the acronym soup that the financial word is so good at brewing. But what does it mean, and why is it important?

If you’re finding that you can’t seem to dig out from under your debt, you’re not alone. There are trillions of dollars in mortgages, student debt and credit card debt in the US, so it’s not surprising that the burden of debt can be difficult to bear for many people.

Borrowing money is one of the most important financial events your life. It can open doors to things that are unavailable to you without help from lenders.

But before you start, you need to do some homework.

The ability to borrow money is essential. Without access to loans, it would be next to impossible to buy a car, get a house or pay for a college education. The cost of these items is so high, that it would take years to save up to buy them.

Debt can be a terrific thing. It can help you buy and enjoy things that are too expensive to buy outright. It is often the only way to make big purchases that would normally be out of reach, and pay for them over time.

What is an APR? For some people the term APR can send a shiver down their spines… What’s so frightening?  APR stands for Annual Percentage Rate, and represents the cost of interest and fees charged by a lender on an outstanding loan.

Student debt may be a difficult burden to bear, but it does help you buy better opportunities. College graduates on average make more money than people who do not finish college. So the money that is invested in a better education should pay off with a lifetime of higher earnings.

There is a great quote attributed to Bob Hope that sums up banks quite nicely: “A bank is a place that will lend you money, if you can prove that you don’t need it”.

Compounding is a terrific thing.  Einstein himself said, “Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t, pays it.”

So you want to own a car? Terrific! Cars can open a world of possibilities, allowing you to travel for work or school, find cheaper housing or travel to less expensive shopping. You will no longer be limited to just your neighborhood looking for opportunities.

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