What Is APR and What Does It Mean?
There are a large number of terms and acronyms used throughout the financial industry that many people do not understand, such as credit scores, APR fixed, APR variable, interest rates and many more besides. †And unless you have worked in the industry or have applied for a loan before, then there is no reason that you should.
To help clarify what these financial terms mean as an existing or future George Banco customer, we will be looking at the terms that have a bearing on you and your personal or guarantor loan, so you can be fully informed when applying.
One of the most important of these financial terms when talking about personal loans or guarantor loans is APR, but why?
APR actually stands for ‘Annual Percentage Rate’ which is the percentage amount in interest that will be applied to the sum of money you are looking to borrow over the period of a year.
A quick and basic example of this when looking at a £1000 personal loan.
Amount being applied for – £1000
APR being applied to the loan – 49.7%
49.7% of £1000 is £497 meaning that over that 12 month period you would end up paying £497 on top of the loan amount of £1000, making a total of £1497.
Note – The above example is based on a fixed APR not a variable APR.
The difference between a fixed and variable APR is quite simply 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 stated at the time of agreeing the loan can increase or decrease depending on various factors such as the base rate for lending, as set out by the government. The bottom line is that in some circumstances, the lender has the right to change the rate of interest whilst you are still paying back the loan.
Keeping all George Banco guarantor loans and personal loans with a fixed APR makes things clearer from the start, meaning that the goal posts do not shift during the repayment period.
So we have a basic understanding of what APR means and what it could mean to you, but what does it mean when the term ‘representative %APR fixed’ is used?
Sadly everyone applying for a loan cannot be given identical APR’s due to the fact that everyone is in a different financial position, and therefore the risk associated with the applicant and the potential for the loan applicant to fail paying the agreed amounts back also differs.
Representative is used to clearly indicate that the figures being used to provide an example loan APR is a representation of a variety of rates. So when lenders state Representative XX% APR (Fixed), it means that a majority of loan applicants have received the stated APR. In many cases the APR can be lower and adversely in some cases it can be higher.
If you know that your finances are in relatively good order but have been refused a loan by traditional lenders due to a minor fault such as exceeding your overdraft amount or something of a similar nature, you can be far more confident of receiving a preferable APR than those who have not cared for and monitored their personal finances as closely.
Use the ‘Get Started Now’ button to start your hassle free application, or if you want to speak to one of the team call 01225 941941.