You are looking to buy a car that costs $30,000.  Your payment is $400/month for 60 months.  If you want to know your interest rate on this loan, you can use Excel.  Excel returns a RATE of 0.70%.  What is your APR?     8.45%     2.75%     3.24%     0.70%

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.