When the interest is added to the principal to generate further interest, the interest is said to be compounded and the frequency this happens is called the compounding period. Interest can be compounded yearly, monthly, weekly, or even continuously.
Points are one of the ways for lenders to cover the costs of processing the loan.
Quoted as a percentage number, this is the amount added to the principal of the loan. This is generally accepted in return for a favorable interest rate. Loans sometimes involve additional cost such as points and other fees, which vary from lender to lender. In order to compares loans, one should use the A nnual P ercentage R ate, the equivalent interest rate after all the added cost being considered. In spite of its name, this interval does not have to be a year.