What Is APR?
When applying for personal loans or just browsing the websites of lenders and brokers you may stumble across different definitions and phrases you’re unsure of. One of the most common ones you’ll see on every single website is APR. APR is one of the most important aspects of lending and borrowing, therefore, it’s essential to have some sort of understanding of the topic. So, what actually is it?
What Does APR Stand For?
APR stands for annual percentage rate. It symbolises a collective of aspects within your loan, like the interest rate and other existing fees, which create the overall total cost. Once the cost is final, your loan will be split into a selected number of mostly identical repayments, also known as instalments.
What Is Representative APR?
Before borrowing a loan, we recommend you have a look around. This way, you can work out which lender is best suited to you and your needs. One of the most important aspects to identify whilst weighing up the pros and cons of each lender is the representative APR. This can help you compare each lender in order to finalise your decision.
Typically, when comparing lenders, you may visit a loan comparison website or something along similar lines. Often, lenders are ranked based upon their representative APR. However, when you actually apply for your loan, the APR rate may change depending on your application and on you as an individual.
What Is A Good APR?
Numerous factors come into play when determining a good APR. This is because there is not necessarily a category for good or bad APR. However, the lower the percentage, the lower your overall cost may be. So, if you can get approved and you fit the eligibility criteria, applying to a lender with a lower APR will benefit you. Thankfully, our eligibility criteria are very simple and straightforward:
- Be aged 18 or over
- Be employed or have a stable source of income
- Live in the UK or be a UK resident
- Have an active bank account
- Have a valid debit card for this account
- Hold a valid email address and phone number
Why Did I Not Get The Percentage I Was Expecting?
When deciding on your lender, you will base your decision on the representative APR suggested by the lender themselves. However, as we mentioned above, your personal loan isn’t likely to match up identically. In fact, it could be completely different. All applications are considered on an individual basis, meaning that your APR is determined by your own financial relationships. Many people to achieve a higher credit score in order to lower the cost. Your credit score plays a huge role when applying for a loan. If your score is low, lenders and brokers will view you as a threat. Therefore increasing the overall interest rate. While on the other hand, if your score is higher, lenders will be more inclined to accept. Therefore lowering the overall cost, meaning the whole process will be cheaper. So, if you’re less of a risk, your APR will be less than the representative percentage. Whereas, if you’re contrasting, you may receive the percentage you were expecting or even higher.
Where To Look Next:
APR rate isn’t the only aspect you can compare when searching for a personal loan. As a reputable lender, we suggest you look at other factors like the loan length, the repayment schedules and even again, the eligibility criteria to ensure you fit. Here at Simple Personal Loans, we offer loans from £1,000 to £35,000 for up to 72 months. Therefore, giving you the opportunity to work at your own pace, whatever the reason. For more information on personal loans, click here.