APR is one of those universally recognized phrases: everyone has a basic idea of what it means, though they may not fully understand the concept as a whole.
So, what exactly is APR?
Annual Percentage Rate, or APR for short, is a metric used by banks, financers, and lenders of all kinds to demonstrate the total repayable amount over the course of the year. More often than not, it is simply used as a representative amount to provide consumers with a rough idea of what they could be paying over the course of the year.
APR
The primary use of the APR is to allow recipients of loans to accurately compare different interest rates or prices from different providers. Rather than showing you the interest rate alone and leaving you to figure out the math, the APR will show you the interest rate over the entire year, complete with any fees or charges involved.
To give consumers an idea of how much a loan will cost them on a monthly basis, the APR ‘total’ will usually be split over 12 months, giving the interested potential customers a closer idea of how much their repayments will be.
Representative APR and Exact APR
Representative APR is another term you might have heard thrown around, especially if you’ve been comparing loans.
Whether you’re in the drawn-out process of applying for a mortgage or simply looking for a payday loans in ten minutes, you will have been subject to the representative APR.
When you are offered credit in any capacity, the lender will usually refer to your credit file (though certain payday loans and bad credit loans aren’t necessarily subject to these checks), which will outline a few crucial factors that they must consider you, including how much you can borrow and over how long, and the interest rate you’re offered.
Every person has different circumstances that might be affecting their credit score, so when lenders advertise a new product, they use a ‘representative’ APR that will represent an approximate total cost over the course of the year.
The legal guidelines state that a representative APR must be the lowest rate offered to at least 51% of customers – this means that just over half of applicants will receive the advertised APR or lower.
Once you’ve been accepted for a loan, you’ll then receive the ‘exact APR,’ which will provide details of the interest rate you’ve been offered and the repayment terms. The exact APR will show you exactly what you will pay over the course of a year, provided the agreed payments are made in full and on time.
Your Credit File
As mentioned above, your credit file can have an impact on the interest rates that you’re offered. A high credit score with a perfect repayment history might make you eligible for preferable, lower interest rates.
A lower credit file could mean that you’re less likely to be accepted for a bank loan or could leave you at risk of higher interest rates, resulting in a higher annual percentage rate.
Payday Loans in Ten Minutes
Anyone who might be looking into a short term lending solution has probably heard the phrase “Payday Loans in Ten Minutes” from multiple different sources. There are hundreds of lenders who provide high-interest payday loans, and each of them makes it as easy as possible for customers to take out the short term advance.
A payday loan is designed as a short term solution, and should generally be paid off within a month, to prevent the total cost soaring. These companies stress the immediate availability, as they can be an incredibly profitable source of income. Whilst they may be a higher risk investment, the rate of return is incredible – some lenders charge up to and over 1000%.
These “payday loans in 10 minutes” aren’t entirely negative, however. They can be incredibly helpful for those short on cash, as emergency bills can come at any time, and we can’t always be prepared.
APR is crucial to understanding potential repayments, so it is imperative that you compare different loans from different providers, using the APR to work out the total cost to you.
