Taking any loan these times has have become a popular tool to fulfil one’s cash needs. Many types of emergency happen when one goes through life, and a significant part of it is a financial emergency. It might be a month endings, and one’s income is already over.
A rent hike by the tenant is suddenly announced, or you met up with an accident and had to leave your job, and thus cash crunch situation knocked on the door.
The times of life are not at all in one’s hands, and meeting any financial emergency is not at all easy. Not only any crises but for purchasing essential and big things, a large amount of money in one tranche is required, which is not easy for a typical person to pay, alone.
For instance, residential property is to be purchased, or a vehicle is urgently required as the place of work and house, has long distances without any public transport. In all such cases, taking various types of loans becomes inevitable, whether it is secured or unsecured or for meeting short term or long term funding needs.
Taking any loans has become an integral part of one’s life, especially for the monthly salaried class of people wholly dependent on one source of income. However, not many people are aware of the rate of interest or as called APR regarding loans granted by lenders in the UK.
Let’s throw some light about APRs as it is very crucial concerning availing any loan in the United Kingdom.
WHAT IS APR?
APR or Annual percentage rate is the total cost of availing a loan.
This percentage not only includes the rate of interest but also other added charges for the entire loan contract. Based on this rate, borrower measures and compares various APRs to get the most affordable and realistic loan contract.
It’s a measuring tool to gauge the level of interest and other charges on the borrowers. In addition, the higher the APR, the higher is the amount charged by a lender. It is in addition to the basic rate of interest in the form of various added on fees.
Many lenders do not charge any loan application or any other charges, but some other banks and financial institutions do, so it becomes crucial to understand APRs.
WHAT THE FCA STATES
The FCA or the Financial Controlling authority of England prescribes the formula of calculating this APR only about Compound interest loans and not for simple interest loans.
Besides, if the loan is paid in numerous instalments, the interest is charged only on the current balance of the principal, not on the original principal amount to clear any doubt.
People mostly are unaware of the impact of APR on their loans and thus suffer by taking a loan which is very expensive for servicing.
Different lenders interpret and offer different definitions of this rate of APR and cite a representative rate of the same on their websites.
Lenders also cite APR for compound interest loans which are not sanctioned by the FCA, burning the cash of the borrowers.
Thus all people should beware of this manipulation and carefully compare and decide the best loan.
Many people are turned away by the banks as they do not qualify for any loans because they have a very low credit score. The past track record of people having lousy debt repayment history often leads to adverse credit reports, and this scares the conventional banks for availing any credit.
Considering this aspect and even to understand the financial situations of people having County Court Judgements, very bad credit loans with no guarantor from a direct lender is present to meet funding needs.
No mandate for any guarantee along with attaching any collateral, these online lenders understand the situation of people struggling with creditworthiness and lend a helping hand. Nevertheless, remember, these loans do have a higher APR than the standard loan option.
It is another popular loan jargon, and many people are not aware of.
Representative APR is the average APR that a lender cites in its website as a tool of measurement.
The actual Apr may or may not equal this rate, and again, borrowers should be wary about this while comparing. Usually, a lender charges higher APR if the risk calculated for lending to a person is higher in comparison to others.
Otherwise, if the risk is less, because of the creditworthiness of a person, then average or standard rates of APR are charged.
O% APR LOANS – NO
When it comes to standard credit cards, any financial institution or online lender can give a 0% interest rate loan.
However, a 0% APR credit loan is never an option sanctioned by the FCA.
Similarly, restrictions are also there on no credit check loans with no guarantors. The direct lenders in the UK are offering them on certain norms in which higher APRs are the one.
Due to available easily just with some few clicks in their website and even same-day crediting of the entire loan amount, people are applying to them despite higher rates.