The Annual Percentage Rate (APR) provides you with a standardised way of finding out the cost of borrowing money. The APR is of particular benefit and interest if you are looking to make a comparison between similar loans or credit cards. If you are fortunate enough to be in a position where you can make a choice between different loans or credit cards, you’ll need to make some form of comparison to ensure you find the option that is right for you. Understanding APR and being able to compare different options through the use of the APR is the perfect way for you to improve your finances.
Before you commit to any loan or credit card, you need to be confident that you can afford the repayments. This should be at the forefront of any decision you make and it should underpin your decision process. You should not be committing yourself to a loan or credit card that you cannot afford to pay. Also, if the lender decides that you are not in a position to meet the payments associated with the loan or card, they should refuse your application. This causes you problems in the short term because it means that you cannot gain access to money that you may have been banking on and in the longer term, it may impact on your ability to get further loans.
Too many applications harm your Credit Score
Every time you apply for credit, a footprint or reference will be left on your credit score. If you have too many credit applications, it will serve as an indicator that you are not managing your finance in the best possible way. If you are seen as being an unsafe or unsound risk by a lender, you may find that your ability to obtain finance in the future falls, making the process even more difficult.
This is why you should weigh up your options and only apply when you feel as though you are ready to obtain credit and that you can deal with the credit in a responsible and mature manner. Comparing different loan or credit card options and then choosing the one that looks best for you will help you stay on top of your credit, and the APR can help you examine the total cost of the loan. Of course, you should look at other aspects as well which means that you should consider the total amount that is payable, the interest rate and if there are any charges associated with the loan or credit card. It is important to check the terms and conditions to determine if there is any impact of late payments or missed payments, because if there are and you fear that these charges may be applied to you, it is best to know what you are dealing with.
Try and not miss Payments
You should do everything in your power to minimise the likelihood of missing payments or being late with a payment but there may be times when your finances run away from you. This is why it is important that you are aware of all of the possible consequences of a credit or loan agreement so you can fully prepare yourself for the worst case scenario.
While you may think that the market is similar and your credit score or standing should be similar no matter who is looking at you, you’ll find that the APR available to you can vary from firm to firm and from product to product. If you are looking to make a comparison it is best to try and compare items that are relatively similar and that can be paid back over a similar period of time.
The lower the level of APR, the generally better it will be for you, so if you come across a lower level of APR, you should give it serious thought and consideration. When you want to be in control of your finances and give yourself the best chance of managing your credit agreement, you’ll find that the APR is vital.
Not everyone will be entitled to receive the same standard of APR so you need to take the time and see what is on offer to you. Some people have found themselves making plans on a lower rate of APR only to find that they have to pay off at a higher rate, so don’t be caught out.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.