Question

Using 125 words or more, explain in your own words why the APR does not compare loans for different lengths of time.

Answer 1

Some classes of fees are not included in the calculation of APR. Because these fees are not included,as some consumer advocates claim that the APR does not represent the total cost of borrowing. Excluded fees may include: routine one-time fees which are paid to someone other than the lender and penalties such as late service without regard for the size of the penalty it will be imposed

Answer 2

APR=Annual Percentage Rate

Which is different if calculated for a month. That is you have to divide by 12 to calculate monthly APR.

As, APR does not compare loans for different lengths of time, because in every month or between the period or cycle for which APR is calculated, the total credit and debit in your account may Alter .

So, for different intervals or we can call duration of time for which APR is calculated your account balance may increase and decrease due to purchase or Paying loan or Depositing Checks.

Also, the reason may be that , APR differs for different amount of value of Loan or Debiting for a certain duration, as well as the period for which money is taken, the APR fluctuates.

That's why APR is not generally used to compare loans for different lengths of time.