If it’s your first time applying for a loan then you’ll surely encounter terminologies that you’ll need to understand. One such term that you will always come across is the annual percentage rate or APR loan.
APR will give you an idea of how much your monthly payment would be by giving you an approximation of your annual interest rate. This is especially true for loan providers, credit card companies and banks. However, all things being equal, don’t be blinded by the APR Loan rate alone as you might be charged with processing fees, insurances and other applicable fees as deemed appropriate in your transaction.
Also, make sure that you understand how much your nominal APR is and if compounding, APR loan fees will be applied. For the purpose of clarity, nominal APR is the simple interest rate per year. If you are charged A1 per month per A100 loaned, assume that your annual nominal APR is A112. For compounding interest rate, say the same APR rate is applied, you’ll pay A101 on the first month, and A102.01 on the second month, and so on.
Looking at the information above, it’s important that you ask your loan provider and have everything explained to you before you become firm in your decision for going ahead with and processing your loan. As always, try to compare by using an APR loan calculator online so that you’ll see if there are other providers around that may give you a better loan rate.
These calculations are part of the bigger consumer protection process which needs to be carried out whenever someone applies for a loan. The Truth in Lending Act requires all lenders to disclose the “real cost” of borrowing a certain amount to protect both parties from legal liabilities should a dispute arise.
APR loan calculation scheme is applied in order to make borrowing and lending an easy process and to help the borrower make an informed decision as to which lending company to go to in order to take advantage of the lowest possible interest rate for their loan.
APR loan rate is not an indication of the entire fees you need to pay for every month. More often than not, the headline rate advertised by banks and credit card companies are different from your actual monthly or yearly payment because of the addition of applicable fees as mentioned above. These fees are always written in the contract that is filled out during the application process.
Lending companies such as banks are required to disclose all the information related to payment in the documents, especially the APR, before the borrower agrees to sign the loan contract that will finalise the deal.
One advice to take when borrowing is to study the APR loan summary clearly and compare it with other banks or companies that provide the same service. For those who are getting a loan to buy a car, you can go directly to any car dealership near you and choose the … Read MoreRead More