If you’re new to borrowing, you may come across certain terms you’re unfamiliar with. The most common terms that come with mattress financing, and any type of financing for that matter, are down payment, APR, and interest rate. Here’s a breakdown of each term:
1. Down payment: A down payment is the initial upfront partial payment made on a product purchased with credit. This partial payment is typically a percentage of the overall cost, such as 5%, 10%, or 20%, and the amount you put down depends on your preferences, current financial situation, and terms and conditions set by the provider.
2. Interest rate: The interest rate refers to the amount a lender charges a consumer to borrow money. Interest rates are expressed as a percentage and are calculated based on the percentage of money lent.
3. APR: Annual percentage rate, or APR, is the interest rate you pay for the entire year and is the cost you pay for borrowing money from a provider. APR is often expressed as a percentage, such as 1%, and includes fees and other charges. APR provides borrowers with a clearer picture of how much they’ll pay, as it includes the interest rate and other fees associated with taking out a loan.