- An average percentage rate is the average rate that the bank charges customers to take out a credit card or loan, including car, mortgage and personal loans. It can also refer to the average rate that the bank offers to customers for interest-bearing checking and savings accounts if you exchange the word "rate" with "yield." Some financial websites and publications collect data from a number of banks across the country to estimate the average percentage rate for various loan products, such as 30-year fixed mortgages and 36-month car loans.
- Average percentage rate is sometimes confused with the term APR, or annual percentage rate. The APR is the amount a bank charges the customer each year in interest and finance costs. The annual percentage rate is used to determine the monthly payment on each loan and the total profit to the bank for lending the cash.
- In some cases, a bank might publish average percentage rates on its website. It is an advertising point to attract new borrowers and customers. A potential customer can use this information to compare it with the average rates offered by other banks. A potential borrower can also call the bank directly to inquire about the latest average rates for various loan programs. However, it is not guaranteed that the borrower will receive the average rate after the bank performs a credit and income evaluation. The actual rate a consumer receives could be lower or higher than the quoted average. Also, the average rates quoted by banks change regularly.
- A credit union operates like a bank, except it is usually a nonprofit organization or owned by its members, meaning its account holders. Since the credit union doesn't operate solely for the purpose of profit, it commonly has a lower average percentage rate for loans compared to banks. So a savvy borrower should investigate rates at both banks and credit unions to find the best offer.
- Advertisement -
- Advertisement -