APR stands for Annual Percentage Rate
What is an APR?
Annual Percentage Rate or APR. It is a term which is featured on various financial products i.e. credit cards, and loans.
APR is the interest rate you pay on an annual basis. In simple terms, it’s the cost of borrowing the money. APR is shown as a percentage and includes fees and costs related to the loan
All providers that lend you money must show the APR rate so you can easily compare products.
What is a Personal APR?
Many people are surprised to find out that there are in fact two different types of APR.
A personal APR really is self explanatory – it is the percentage amount that you will be liable to pay. This will be the APR offered with the product. You will either be accepted and pay this APR, or you will be rejected. The rate doesn’t alter depending on your credit score, which it can do when you are applying for a loan or a credit card.
What is typical or representative APR?
A typical or representative APR is an advertised rate that you will pay for the year.
Representative or typical APR refers to the rate that at least 51% of people who are accepted for that product will pay or lower. Meaning up to 49% of people who take out that product may pay a higher APR than that advertised.
For unsecured loans and personal loans (including bad credit loans), this Representative APR may well depend on the amount borrowed. Remember to check the Representative APR when comparing products.
When a lender accepts you for a loan or a credit card, make sure that you always double-check the actual APR that you are being charged, as this could be substantially different from the representative APR. The rate of interest on some forms of borrowing is decided on with reference to your financial status generally and your credit history.
Check and compare the APR’s
It is important to recognise that an APR has no bearing on whether or not a lender is likely to accept you. You should do as much preparation as you can before applying for any kind of loan by understanding the loan criteria requirements of the lender. This will ensure you are able to afford the loan.
It’s always good to do your research
- Check you meet the criteria of your preferred provider to get an idea of whether your application is likely to be successful before you formally apply.
- Compare lenders products and APR’s so you can make an informed decision.
- Check the frequently asked questions section on their website which will give you more information.
Think carefully before securing debts against your home your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
