About the APR

APR mischief

Although an advertised Annual Percentage Rate (APR) should be offered to over 60 per cent of the borrowers, many banks still don’t do it. When taking a personal loan your rate might be different to the one advertised because of your credit score.

Sometimes a clean credit history is not enough to qualify for the quoted rate. The likelihood of you paying the loan earlier, as many other factors, can also influence the adjusted rate. If you show that you pay your debts on time your lender will consider you lower risk, and might grant you a lower rate. Remember that even if you qualify for the typical APR, it is often variable. In some cases it remains low and fixed only for a certain promotional period. After, it adjusts to the institution’s average rate which fluctuates in line with the Bank of England’s base rate. Therefore, it is difficult to forecast the real APR you will be paying throughout the life of the loan.
Although the APR should be used as a benchmark for comparing different products and providers, the comparison cannot be often done in equal terms. Lenders’ policies and calculation formulas differ. Some include application fees while others vary the rate depending on the size of the loan. The APR calculation doesn’t take into account  optional costs embedded in the loan.