---
title: "APR Made Simple: What You Need to Know About Loan Costs with Real Examples ({{ hubdb_table_rows('promo_codes_and_rates')[17].year}}) | PrimeWay Federal Credit Union"
description: Confused about APR? This guide breaks down loan costs into simple terms. Learn how APR affects your total loan payment with real-life examples.
---

[PrimeWay Blog ](https://www.primewayfcu.com/blog)

# [APR Made Simple: What You Need to Know About Loan Costs with Real Examples ({{ hubdb_table_rows('promo_codes_and_rates')[17].year}}) | PrimeWay Federal Credit Union](https://www.primewayfcu.com/blog/apr-annual-percentage-rate-explained)

 Written by [PrimeWay](https://www.primewayfcu.com/blog/author/primeway) | Feb 5, 2015 11:00:00 PM

Want to understand APR, but all the banking terms confuse you? Don't worry! Here's everything explained in plain English with no fancy words.

## 1. What is APR? The Simple Answer (With $10,000 Example)

APR is just the total cost of borrowing money for one year. Here's what that means:

- It shows how much extra money you'll pay for a loan
- It includes your interest rate plus any fees
- Lower APR = You pay less money
- Higher APR = You pay more money

Using $10,000 as an example:

- 10% APR means you pay about $1,000 extra per year
- 20% APR means you pay about $2,000 extra per year
- 5% APR means you pay about $500 extra per year

### 2. Credit Cards and APR: Two Ways to Use Your Card ($10,000 Example)

### The Smart Way (No Extra Charges):

If you charge $10,000 on your card:

- Pay the full $10,000 when bill comes
- You pay $0 in extra charges
- Total cost = exactly $10,000

### The Expensive Way (Extra Charges):

Same $10,000 on your card:

- Only pay $300 minimum payment
- Keep $9,700 balance on card
- With 15% APR, you'll pay about $121 EXTRA in just the first month
- If you keep doing this, you'll pay about $1,500 extra in one year

### 3. Your Credit Score Matters ($10,000 Example)

Think of APR like grades:

Using a $10,000 loan for one year:

- Excellent Credit (700+): 8% APR = $800 extra per year
- Good Credit (650-699): 12% APR = $1,200 extra per year
- Fair Credit (600-649): 15% APR = $1,500 extra per year
- Poor Credit (below 600): 20% APR = $2,000 extra per year

Good to know:

- Average credit card APR is 15%
- Less than 15% = Good deal
- More than 15% = Not so good deal

### 4. How Banks Figure Out What You Pay ($10,000 Example)

### For Credit Cards:

If you have $10,000 balance with 15% APR:

- Daily rate = 0.041% (15% ÷ 365 days)
- Daily cost = about $4.10
- Monthly extra cost = about $123
- Yearly extra cost = about $1,500

### 5. Save Money on APR: Simple Tips ($10,000 Example)

### Credit Card Tips:

You charge $10,000:

Best Option: 

• Pay full $10,000 when due   
• Pay $0 extra   
• Total cost = $10,000

If You Can't Pay It All: 

• Pay only $300/month  
• With 15% APR  
• Take 4 years to pay off  
• Total cost = about $13,000  
• You pay $3,000 extra!

### 6. Common Questions

### "Can I Choose My APR?"

No. Banks look at:

- Your credit score
- Your income
- Your other debts
- Then they set your APR

### "Does APR Hurt My Credit Score?"

- No - your credit score affects your APR
- But your APR doesn't affect your credit
- Late payments DO hurt your credit

## Easy Ways to Get Better APRs

### 1. Make Your Credit Better:

- Pay bills on time, every time
- Keep credit card balances low
- Don't apply for lots of new cards

### 2. Be a Smart Shopper:

- Check different banks
- Ask lots of questions
- Don't rush to decide
- Read everything carefully

### 3. Watch Out For:

- Very high APRs (over 15%)
- Rates that can change
- Hidden fees
- Deals that sound too good

[View full post](https://www.primewayfcu.com/blog/apr-annual-percentage-rate-explained)

```json
{
  "@context" : "http://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "PrimeWay"
  },
  "dateModified" : "2024-10-29T12:36:08.136Z",
  "datePublished" : "2015-02-05T23:00:00Z",
  "headline" : "APR Made Simple: What You Need to Know About Loan Costs with Real Examples ({{ hubdb_table_rows('promo_codes_and_rates')[17].year}})",
  "image" : {
    "@type" : "ImageObject",
    "height" : 559,
    "url" : "https://f.hubspotusercontent00.net/hubfs/6173259/Website%20Images%202.0/Blogs/1058843162.jpg",
    "width" : 1117
  },
  "mainEntityOfPage" : "https://www.primewayfcu.com/blog/apr-annual-percentage-rate-explained",
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "height" : 60.0,
      "url" : "https://www.primewayfcu.com/hubfs/primeway-brand/PrimeWay-Logo-website.svg",
      "width" : 60.000004
    },
    "name" : "PrimeWay Blog"
  }
}
```