The calculation of apr is to directly divide the loan principal by the number of loan periods to obtain the monthly principal repayment, and then multiply the loan principal by the monthly rate to obtain the monthly interest. Under this algorithm, The principal and interest in the monthly repayment are the same, so some people in the market call this type of repayment "equal principal and equal interest".

1. APR

APR: Annual percentage rate, annual interest rate. This is a term used in credit cards to refer to the interest that is charged when you owe money. Usually after the repayment date is exceeded, the interest on the outstanding amount starts to be calculated. Assuming a credit card with an APR of 18, the monthly interest rate is 18/12=1.5. If you owe $1,000 and one month has passed since the repayment date, the interest you need to pay is $1,000*1.5=$15.

2. IRR

IRR calculates interest based on the loan balance, that is, the interest calculation base for the current period is the remaining loan principal, the total present value of capital inflows and the total present value of capital outflows When the discount rate is equal and the net present value is equal to zero, when calculating the loan interest rate in this way, the actual cost of using loan funds can be obtained.

APR is the annualized interest rate, which refers to the annual interest rate given to the outside world when calculating interest on a loan within one year. The annual interest rate = the sum of interest charges/borrowing principal.

3. What are the differences between the two?

The biggest difference between the two is that the interest rate base is different. The APR algorithm calculates interest based on the loan amount, and the interest calculation base for the current period is the loan amount at the beginning of the period; the IRR algorithm calculates interest based on the loan balance, and the interest calculation base for the current period's interest is the remaining loan principal.

If the repayment method is a one-time repayment of principal and interest upon maturity, the loan balance is the initial loan amount, and the interest results of the two algorithms are the same; if the repayment method is equal principal and interest or equal principal and interest over time, For example, the currently popular installment loan, because the loan balance is dynamically changing, the interest rate calculated by IRR is much higher than APR.