Future Business Leaders of America (FBLA) Business Calculations Practice Test

Question: 1 / 400

If a loan has a high APR, what does this indicate about the loan?

It’s a low-risk loan

Payments will be lower

Interest costs will be higher

A high Annual Percentage Rate (APR) for a loan indicates that the interest costs associated with borrowing are higher. The APR represents the yearly cost of borrowing expressed as a percentage of the loan amount. When the APR is high, it means that borrowers will pay more in interest over the life of the loan compared to loans with a lower APR. This higher cost can stem from various factors, such as the borrower's creditworthiness, the type of loan, or the level of risk assumed by the lender.

Interest costs are a crucial aspect of borrowing, and understanding APR helps borrowers make informed decisions about which loans to accept. While a high APR usually means higher payments in the long run, the direct relationship between high APR and higher interest costs is the key point that signifies the overall expense of the loan.

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It’s a government-backed loan

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