Usually specific to personal loans APR is the total of the interest plus origination fees which are calculated on a yearly basis and presented as a percentage to help you compare the fees associated with getting a loan. In other words, APR is the amount you will pay the bank or a financial institution for borrowing money from them.
When applying for a personal loan, APR is the easiest metric to determine the total cost of the loan. Personal loans are fixed-rate installment loans protecting your payment to stay the same through the life of the loan, which means the same interest rate, and the same monthly payment until you pay the loan.
Interest rates vary depending on a few factors such as credit score, loan amount, income, and credit history and sometimes they use non-traditional methods of getting creative to fund more deals. To get you a percentage lenders take a combination of income, credit history, and credit score.
In a simple explanation, they use math to see what would be a risk of them giving a loan and what are the chances of you paying back the loan in full on time. Usually the better the credit score it tells lenders that you have been paying people on time which means you will treat their loan the same way.
APR is calculated with a complicated equation that will seem like gibberish to most people. Luckily for us loan industries are regulated and make it easier for us by doing the work in calculating APR for us.
In most cases, APR is the best way to determine which loan is the best for you because it shows the full cost of obtaining the loan so all the fees included considering the interest instead of knowing only the interest. This will help you confidently choose the right loan for your situation.
Annual Percentage Rates fluctuate a little depending on how the economy is doing. But if you have an excellent credit score around 690 and up. You will get the best interest rate offered on the market currently.
Here is an estimate of what the rates look like compared to your credit score on average.
Bad Credit 300-629
Fair Credit 630-689
Good Credit 690-719
Excellent Credit 720-850
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These estimates are provided from an online source with a comparison to many lenders. The APR usually varies depending on the lender and the interest rates they offer. Depending on your credit score, lenders specialize in all sorts of credit so you can easily qualify for a loan. Usually, the lower the credit score the higher the interest rate would be.
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