With online urgent loan lending platforms on the rise, it’s usual for people to come across certain buzzwords and dismiss them without learning more about them. An APR is one such buzzword that a lot of borrowers don’t care to know much about, or worse – they don’t know what it is at all!
An APR is an acronym that stands for Annual Percentage Rate. An APR is a percentage that denotes the total cost of a loan out of the borrowed loan amount.
- How is the APR calculated?
Consider this situation where you borrow a fast loan at a 12% annual interest rate and a 200 USD additional fee. When we count the 200 USD fee, we realize that the borrower is paying more than just 12% of the amount borrowed, in addition to the installments. In this case, the APR will be greater than 12%, which would reflect that the true value of the loan is higher than the sum of the interest amount along with the loan amount borrowed.
- Why should borrowers know about APR?
A loan comes with many other charges, making the borrower pay more than how much they borrowed from a bank or a private lending institution. Borrowers usually factor in the interest rate when calculating the actual cost of taking a mobile loan and assume that it is all the math they are required to do. This assumption might lead a borrower to settle for a loan with a lower interest rate. In reality, there can be charges other than the interest rate, which might increase the total cost of the loan. That’s when an APR comes into the picture.
APR is important because it provides a way to compare different loan options. The higher the APR, the more the borrower will have to pay back to the lender over the repayment term. Thus, checking the APR is just as important as checking the interest rate while taking a loan.
- Is an APR negotiable?
Practically, yes. Being good at repaying past small loans will strengthen your credit score, which will help you get the loan at a lower interest rate. Thus, the APR will also come down. In cases where your credit score isn’t strong enough, consider directly talking to the lender. A good lender-borrower relationship might benefit you here. If nothing of that works, try exploring more loan options. You will have many loan options if you want to get a loan online through a loan app.
- Are there any limitations of APR?
Yes. While APR is a useful metric that tells a lot about the true cost of borrowing, it doesn’t factor in the fees that a borrower may be charged afterward— for example, a prepayment penalty. If a borrower pays back the total amount before the predetermined repayment tenure, the lender might penalize the borrower if this penalty was mentioned in their terms and conditions. Additionally, depending on a person’s financial needs, a new APR might not always signal a better loan option. Therefore, when looking at APR, a borrower must also factor in their unique circumstances before deciding which option to go forward with.
In conclusion, an APR is a useful metric that can help a borrower determine the true cost of a loan. By comparing the APRs of different loan options, a borrower can find a deal that best suits them.
With online urgent loan lending platforms on the rise, it’s usual for people to come across certain buzzwords and dismiss them without learning more about them. An APR is one such buzzword that a lot of borrowers don’t care to know much about, or worse – they don’t know what it is at all!
An APR is an acronym that stands for Annual Percentage Rate. An APR is a percentage that denotes the total cost of a loan out of the borrowed loan amount.
- How is the APR calculated?
Consider this situation where you borrow a fast loan at a 12% annual interest rate and a 200 USD additional fee. When we count the 200 USD fee, we realize that the borrower is paying more than just 12% of the amount borrowed, in addition to the installments. In this case, the APR will be greater than 12%, which would reflect that the true value of the loan is higher than the sum of the interest amount along with the loan amount borrowed.
- Why should borrowers know about APR?
A loan comes with many other charges, making the borrower pay more than how much they borrowed from a bank or a private lending institution. Borrowers usually factor in the interest rate when calculating the actual cost of taking a mobile loan and assume that it is all the math they are required to do. This assumption might lead a borrower to settle for a loan with a lower interest rate. In reality, there can be charges other than the interest rate, which might increase the total cost of the loan. That’s when an APR comes into the picture.
APR is important because it provides a way to compare different loan options. The higher the APR, the more the borrower will have to pay back to the lender over the repayment term. Thus, checking the APR is just as important as checking the interest rate while taking a loan.
- Is an APR negotiable?
Practically, yes. Being good at repaying past small loans will strengthen your credit score, which will help you get the loan at a lower interest rate. Thus, the APR will also come down. In cases where your credit score isn’t strong enough, consider directly talking to the lender. A good lender-borrower relationship might benefit you here. If nothing of that works, try exploring more loan options. You will have many loan options if you want to get a loan online through a loan app.
- Are there any limitations of APR?
Yes. While APR is a useful metric that tells a lot about the true cost of borrowing, it doesn’t factor in the fees that a borrower may be charged afterward— for example, a prepayment penalty. If a borrower pays back the total amount before the predetermined repayment tenure, the lender might penalize the borrower if this penalty was mentioned in their terms and conditions. Additionally, depending on a person’s financial needs, a new APR might not always signal a better loan option. Therefore, when looking at APR, a borrower must also factor in their unique circumstances before deciding which option to go forward with.
In conclusion, an APR is a useful metric that can help a borrower determine the true cost of a loan. By comparing the APRs of different loan options, a borrower can find a deal that best suits them.
