APR is a common term you will come across whenever you try to borrow money. It stands for Annual Percentage Rate but it shouldn’t be mistaken for interest rate, which is different. APR tells you how much your loan will cost you in a single year. By understanding this amount, you will be able to compare loans from different companies and choose the one that works best for you. So don’t rush and pick from any random doorstep loans you might find and use a trusted comparison site. Usually, a lower APR is better than a higher one with mortgages being an exception.
Some loans have fixed APR whereas others have variable APR. Whether you pay a high APR or low APR on loans depends on the type of loan you plan to get. Home loans and auto loans come with lower rates as the property or vehicle can be used as collateral. Lenders usually allow lower rates when they know that you can pay them back reliably. Those looking for loans for bad credit will, unfortunately, find themselves paying a higher rate usually. Here are some tips on getting a loan with a better APR.
1) Shop Around
Don’t settle for just any doorstep loans that might come your way. You need to shop around and compare APRs to find the lowest one. Don’t trust anyone. Do the research on your own.
2) Clear Your Debts
This is another crucial aspect of finding the best loan. If you have sizeable debts, you won’t be eligible for loans with low APR. If you have a sizable credit card balance, you need to clear as much as you can before applying for a loan. The last thing you want is to find the perfect loan and realize that you’re not eligible for it.
3) Check the Fine Print
Even if a low APR loan looks great on paper, always make sure you read the fine print. Some institutions have rather nefarious ways of extracting money from their clients. If you do get a loan, make sure that it is one that you can pre-close without having to pay a large fee.
4) Consider Alternate Routes
Banks aren’t the only place where you can borrow money. You can try peer to peer lending services like Zopa which is essentially an online marketplace for lending money. It links borrowers and lenders but applicants do need to be eligible before they can be accepted.
5) Understand What You Are Getting Into
This is of paramount importance. Sometimes you might feel like you have no choice but to look for a loan. However, you need to plan everything properly to ensure that you will be able to make the payments consistently over the specified amount of time. Defaulting on loan payments can destroy your credit score.
No matter what type of loan you choose always strives to maintain a good credit record. Depending on how good your credit record is and which loan matching service you use, you have better chances of securing a low APR loan.