In This World - Problem of the Day

CNN News Clip
Karen and Wayne must buy a refrigerator because theirs just broke, and they will borrow money to buy a new one. The bank offers them a personal loan at 21% (APR), and Sears offers them an installment loan at 15% (add-on rate). Karen says that she has heard something about APR rates but doesn't really know what the term means. Wayne says he thinks it has something to do with the prime rate, but he isn't sure. In this section, Karen and Wayne will learn about installment loans and, in particular, about add-on interest and APR.