Annual Percentage Rates vs. Annual Percentage Yield

For loans (including private student loans), student credit cards or investments that involve compounding interest, there are two popular interest rate related terms.

Annual Percentage Rate, or APR, is a measure of how much interest will be on an annual basis without taking into account compound interest.

Annual Percentage Yield, or APY, is the same interest rate measure, but accounts for compound interest – a better measure of how much you will actually pay in interest. Banks and credit card issuers often express credit card interest rates in APR, in order to better hide just how much interest would cost.

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Stafford Loan Interest Rates Lowered

As I’m sure many of our readers out there know, the interest rate for subsidized undergraduate Stafford Loans has recently lowered for the 2010-2011 year. As of July 1, 2010, the interest rate dropped from 5.6% to 4.5% which was a major step forward for federal loans.

Well, lucky for all the students out there with Stafford loans, because it’s scheduled to happen again. The Subsidized Federal Stafford Loan interest rate for the 2011-2012 academic year is planned to drop to 3.4%, hitting an all-time low!

For more information on student loan interest rates, visit Staffordloan.com where you can also read about loan repayment options.

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