The specific rates and terms of an APR vary depending on the type of loan it’s attached to. The two main types of APR are fixed and variable.
Variable APR
The interest rate of a variable APR is subject to change at any time during the term of the loan, usually in response to market interest rate fluctuations. This means your APR payments will change as well.
Fixed APR
Conversely, a fixed APR stays the same from the moment your loan is finalized until it’s been paid in full. The interest rate is set by whatever the market rate is at the time the loan was closed. With a fixed APR, you’ll never be taken by surprise should the market interest rate rise. On the other hand, if the rate falls below what it was when you received your loan, you’ll still be paying the higher rate.
Credit Card APR
APR grows more complicated with credit cards. Card issuers are free to charge a different APR for each type of transaction, such as one for purchases, one for cash advances and one for balance transfers. Credit card companies also charge a high-rate penalty APR should the borrower miss a payment or violate the terms of their credit agreement.