What is the rate imposed by the lender for a borrower to pay on a loan known as?

The rate imposed by the lender for a borrower to pay on a loan is known as the annual percentage rate (APR). APR represents the annual cost of borrowing, expressed as a percentage of the loan amount. This rate includes both the interest cost and any additional fees that may be associated with the loan. By using the APR, borrowers can more easily compare different loan offers, as it provides a standardized way to evaluate the true cost of borrowing over a year, making it a crucial component of informed financial decision-making.

In contrast, a loan term refers to the duration of time over which the loan must be repaid, while the principal is the initial amount of money borrowed. The credit limit is the maximum amount of money a lender is willing to extend to a borrower on a credit account but does not directly relate to the rates charged for loans. Therefore, understanding that the APR encompasses the total cost of borrowing makes it clear why this term is used to define the rate imposed by lenders.