How does APR affect monthly payments? APR, or Annual Percentage Rate, can affect monthly payments by influencing the total cost of borrowing money over the life of a loan. A higher APR means a higher total cost of borrowing, which can lead to higher monthly payments. When you take out a loan, the lender will typically calculate your monthly payment based on the total amount borrowed, the interest rate, and the length of the loan. The APR takes into account not only the interest rate but also any other fees associated with the loan, such as origination fees, points, and other charges. The higher the APR, the more you will pay in interest and fees over the life of the loan. This means that your monthly payment may be higher if you have a higher APR. For example, if you have a $10,000 loan with a 5% interest rate and a 3-year term, your monthly payment would be $299.71. If the APR for the same loan were 10%, your monthly payment would increase to $332.14. It’s important to consider the impact of APR on monthly payments when comparing loan offers. A lower APR can mean lower monthly payments, which can help make the loan more affordable over time. However, it’s important to consider other factors, such as the length of the loan and any fees associated with the loan, to determine which offer is the best fit for your financial situation.