All the lenders who are authorised by the Financial Conduct Authority will display the APR of the loans they are offering. However, an APR calculator can be useful when you are comparing different offers from multiple lenders.
Is there any difference between APR and interest rates?
Yes. There is a difference between an APR and interest rate. An interest rate is charged on the principal amount that you borrow. While an APR takes into consideration the finance charge. Therefore, it can be said that an APR indicates the actual cost of borrowing.
So, while comparing personal loans you should compare the offers that you receive based on their APRs. The lender offering you the lowest APR is likely to offer the best value on the deal that you are about to secure.
APRs significantly impact the monthly repayment amount that you will have to pay each month. Hence, compare multiple offers to find the best one available.
What is a good APR rate?
The lower the APR, the better it is. When you apply for a loan, lenders assess a wide range of factors for setting the APR. The interest rate that you will be charged depends on your credit score, debt-to-income ratio, employment status, loan amount, and the term of the loan.
If you have a good credit score and a low debt-to-income ratio, you are most likely to get a personal loan with a low APR. Therefore, before applying for a personal loan, work on improving your credit score to get a good APR rate.