What do you need to know about APR?
Where loans of any kind are concerned, and that includes personal loans, credit cards, mortgages and goods on credit, they are all subject to this thing called APR.
So what does APR actually mean?
APR stands for Annual Percentage Rate and is a way of measuring the interest rate (including any other charges) that can be applied to the amount repaid per year for the loan in question. It is actually a formula laid out in the consumer credit act (1974) that every lender must adhere to.
If you were looking to borrow – £100
APR (Annual Percentage Rate) being applied to the loan – 50%
50% of £100 is £50, meaning that over that 12 month period you would end up paying £50 on top of the loan amount of £100, making the total repayable of £150.
Note – The above example is based on a fixed APR.
(The difference between a fixed and variable APR is that a fixed APR will stay at the agreed interest rate for the period of the loan provided payments are kept up as agreed.
A variable APR means that the interest rate agreed at the time of accepting the loan can increase or decrease depending on various factors, such as the base rate for lending, as set out by the Bank of England. The main point is that in some circumstances, the lender has the right to change the rate of interest whilst you are still paying back the loan.)
This leads straight on to the next obvious question which is; what is an interest rate?
Interest rates when talking about personal loans or guarantor loans is the amount of interest you will pay in return for borrowing someone else’s money, in this case the lender.
Why do interest rates change from lender to lender or borrower to borrower?
In general the APR will vary from company to company dependent on the type of customer they have dealings with. If the company deals with customers that have good or healthy credit ratings then that company will tend to offer lower APRs.
Those companies that deal with customers who have poor or bad credit ratings tend to offer higher APRs. This is due to the higher risk of the borrower being able to repay the loan. So, in order for that company to take the risk of lending to the customer in the first place, it will cover its bases by making the money back quicker with a high APR.
Another factor can also be the length of time the loans are agreed over. This is why the interest on Payday Loans can often be in the thousands of percent. With this type of loan company they lend over a very short period of time and to people with bad credit ratings, so they need to make their money back as quickly as possible.
George Banco is proud to offer a very competitive APR
At George Banco, part of the reason the APR is very competitive is because the time period our loans are agreed over are usually between one and five years. This gives George Banco time to make the money back whilst also still being able to offer a competitive rate for those with a bad or poor credit rating.
If you would like to find out whether you would be eligible for a guarantor loan then head on over to the simple online application form and we will do the rest.