When you take a loan, you pay a certain percentage of interest for it. The percentage amount you pay extra is the interest rate that the lender charges and any additional fee.
This total amount is popularly called APR or the annual percentage rate. It is the total percentage of the amount you pay when you borrow a loan from a lender.
This amount is charged monthly in case of loans. However, for credit cards, this is the annual fee you pay to use the card or the amount you pay in the event of payment failure.
Whether you apply for a personal, business, or £200 loans for bad credit, APR is a mandatory charge that everyone pays.
It is an additional charge along with the monthly interest you pay with your easy monthly instalment. It is possible to adjust the APR by adjusting the amount of instalment you pay and the total number of years you will repay the entire amount.
If the number of years is less, the APR would also be less, and it keeps increasing with the increase in the number of years. Let us discuss some of the things about APR to see how it can benefit you.
Things you should know about the APR
- The annual percentage rate for cards or loans can vary for different vendors. Moreover, the same vendor can charge you a flexible interest, which changes after a certain period. Ask your lender about this and go for the fixed APR credit cards to avoid inflexibility.
- Your monthly APR is mentioned on the card bill that you receive every month or on the EMI slip you get when you pay the instalment for your loan. If the lender wants to change this interest rate, he sends you a written confirmation over email.
- If you have an excellent credit score, there are chances that the lender keeps your APR to a bare minimum percentage. So, keep working on keeping your credit score high to ensure that you pay a lesser amount as the interest. It is possible by paying your bills on time and keeping an eye on your spending.
- Those who are only looking for the APR on a credit card should know that you can completely avoid the interest if you keep paying the bills on time. Though there will be a bare minimum fee that you pay at the end of the year for card usage, no monthly charges are applicable.
- If you dig deeper, you can even find the lenders who offer interest-free repayment for a few months on your card bills. However, if you talk about the £200 loans for bad credit or any other loan, it gets paid monthly. The lender will divide your instalments, adding the interest into it.
- How much you earn or your financial history also affects the annual percentage rate you pay for your loan. If you have been in stable financial condition over the years, you can get a significant loan amount, paying the least interest rate.
It is fair to say that you should educate yourself about the loan type and the APR before signing up for it and borrowing the money.
It is vital to find reliable lenders who give the utmost clarity to the consumer and keep things transparent with them. Sit with them to discuss all your queries, and if everything deems fit, you can apply for the loan.
Another factor that you need to keep in mind is to stick to the loan repayment plan and never come across as a defaulter.
Failing to pay the instalment on time can fetch you added interest on your principal amount.