How does an APR work? Answers: APR, or annual percentage rate, is best explained like

Answers:
APR, or annual percentage rate, is best explained like this. Most cases, it's on an average on a daily basis balance. Say you enjoy a $1000 loan. Say you're paying 10% APR. The "annual" part of APR system that 10% on $1000 is $100 in interest that you would payment in a year on that $1000 loan. If you divide that by 365 days contained by a year, it means you are paying more or less $0.27 per day surrounded by finance charges (interest). In a month, that's $8.33.

Other Answers:
It's a complex numerical totalling that gives a concise rate for your annual interest.

Depending on what type of credit - mortgage, credit card etc., what constitutes APR vary. Source(s):
http://en.wikipedia.org/wiki/Annual_percentage_rate