Understanding APR

See how interest adds to debt, and how rates almost always lead to problems.

See how APR adds interest to debtCredit cards and loans aren’t free money. The convenience of any credit line comes at a price, and that price is the interest that gets tacked onto your debt. Any money borrowed will always cost more with the interest added.

Interest is really a fact of financial life. If you take out a loan or use credit , you’ll pay for the convenience and purchasing power in added charges. Unfortunately, interest can be a problem when it gets too high or when debts are left for too long without being paid-in-full.

The information below will help you understand what interest is and how it gets applied to your debts. If added interest has led to issues with debt, we can help you regain control. Call Consolidated Credit today at or take the first step online with a free Debt & Budget Analysis.

What is an APR?

Interest is usually calculated in the form of an APR or Annual Percentage Rate. Technically, it is a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction. Interest is applied every month until your debt is paid off.

This means that while you’re taking action to pay down your debt every month, your debt is also growing by a little bit every month, too. In normal circumstances, your payments are more than the accrued interest; so every time you make a payment, you pay the interest added in that month, plus a little bit of the original debt.

As a result, you pay a significant chunk of money to the creditor or lender before your debts are paid in-full. The bigger the debt and the longer it takes to pay off, the more money you’ll pay in interest.

What happens when APR is too high?

When your APR is too high, you have two problems. The first problem is that your debts will actually cost more in interest than the original purchase price of the items you get. A purchase can end up costing 2-3 times the sticker price with interest added. It’s a waste of your money.

The second problem is how interest can eat away at your monthly payments. If the APR is too high, the interest eats up most of your payment. As a result, you never see your balances go down. In very bad circumstances, your debts actually grow in spite of payments being made everything month. It’s one step forward, two steps back.

How do you get ahead with high interest?

One word: refinancing. You have to find a way to get the lender to agree to lower the interest rate so you can recover and get ahead on your payments. In some cases, you can negotiate directly with a lender or creditor to reduce your interest rates. For your mortgage, there may also be government programs available for modifications if you’re facing foreclosure.

For credit card debt, there’s several ways to consolidate your debt so you can lower the interest rates being applied. If you have good credit, then a balance transfer or personal consolidation loan may be the solution you need. If you don’t have good credit, then the only option you have for reducing your interest rates is usually enrolling in a debt management program.

We can get your interest reduced or eliminated

If you’re struggling with high interest rates and charges, we can help you find out if a debt management program can work for you. On the program we may be able to reduce your interest rates to 11 percent or less. In many cases, we can even negotiate with creditors on your behalf to eliminate interest charges completely so you can regain control as fast as possible.

Call us today at to request a free evaluation from a certified credit counselor or take the first step online now with a request for a free Debt & Budget Analysis.