The Annual Percentage Rate is used to denote the interest rate associated with an investment or credit.
The calculation is based on the compound interest and provided that the interests obtained are invested using the same interest, this kind of interest allows comparing different products or investment options, independently of their particular conditions. It is normally used with similar products whose elements and risk are the same. The entity is obligated to inform its clients about this kind of interest.
The calculation of the APR includes all commissions and expenses that the client has to pay to the entity for the service or credit. The APR does not include the following:
1. Expenses that the client can avoid that are included in the contract
2. Expenses to be paid by a third part
3. Insurances or warranties, as long as the entity does not impose one of those