Business and Personal Finance Dictionary

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• EFFECTIVE RATE OR COST
  
  When you are quoted an APR, the total amount of that APR is calculated assuming that you will keep the loan for the entire term of the loan. There is a very good chance that you will sell your home before the mortgage is paid off, and the effective rate or effective cost reflects the total cost of the loan over the number of years that you actually intend to hold it.
  
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