| It is of vital importance
that you understand exactly what APR is and how it works if you are looking to
get your hands on a personal loan. APR is an acronym standing for 'annual percentage
rate' and is an inclusive percentile figure which represents not only the interest
charged on a loan but also any other fees that may be charged on that loan. Other
charges might be legal fees or arrangement charges. In this way APR represents
the true cost of borrowing. There are laws in operation that stipulate the way
in which APR must be calculated so that consumers can rely upon it as a fair way
of comparing products from a range of providers. All lenders are obliged by law
to present to you the APR on a particular product before any credit agreement
is arranged and signed. The Consumer Credit Act works in this way to ensure that
consumers are allowed access to objective and accurate information about personal
loan products on offer.
However, it is important to remember that APR is charged in either one of two
ways- at a fixed or variable rate. A fixed rate will offer you security because
it is guaranteed not to change throughout the term of your UK personal loan, although
variable rates will usually initially be charged at a more preferable rate. Think
about which type of APR would suit your needs best- would you prefer the security
of the fixed rate or take your chances with the variable option?
Although laws have meant that APRs must be calculated in a just and accurate
way, there are still a couple of questions that you should ask yourself, or the
loan company, if you come across an APR that appears to be exceptionally low.
Find out whether any fees included in the APR are charged at a fixed or variable
rate. If fees are calculated at a variable rate then your payments could change
throughout the term of your personal loan. Find out if there are any extra payments,
such as those that would be required for a payment protection plan, that are not
included in the APR. Also, if you come across a personal loan with an exceptionally
low APR then be doubly sure to check the terms and conditions of the loan to be
sure that you are not bound in overly restrictive or inconvenient ways.
Read more about UK personal loans
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