For many of us, financial stability is something we are working towards every day. Not only are we saving to get in the best financial position possible, but we are also met with several loan types claiming to be offering an affordable APR, but are they really that affordable? In this article, we will be providing you with insight into APR and how it can affect you.

What Is APR?

An APR is the annual percentage rate that a lender charges you when you borrow money from them. This is a combination of both the interest rate and any fees that the lender adds on. This is therefore considered the total price when looking at the money that you have borrowed. Though APR is fairly rigid, there are several steps that you can take to bring it down. One of the most common ways of doing so is to pay back all repayments on time. This will show your lender that you are capable of being responsible with your money and will limit interest rates. In addition, this will reduce the possibility of any interest being added due to the late repayment as this can soon add up if not monitored.

How Can You Lower APR?

In addition to paying back repayments on time, there are also several other ways that you can reduce the APR on your loans. Whether it is applying for specialist guarantor loans with a low APR or improving your credit score over time to manually reduce it, this can all bring down monthly payments and make your loan more affordable.

However, all repayments must be made on time. Though there are FCA regulations to make sure that the market is fair, there are interest rates that can be added onto any late payments. Therefore, if you think you are going to default on your payments at any point, you should make your lender aware. You will then be able to discuss an alternative payment method that works around payday as this will ensure the best possible chance of you paying it back on time.

Different Types OF APR

The final element to understand is the different types of APR that are available these are as follows:

Purchase APR- This is the most common form and is found on several different loan types.

Balance Transfer APR- This applies when balances are transferred from one card to another.

Introductory APR – This is often used to entice new customers and is commonly shown as 0% APR for a set number of months.

Cash Advance APR – This is used when cash is taken out of your credit cards line of credit.

Penalty APR – This is when you miss a repayment, this often means that the monthly APR will rise.

Each of these can apply to a variety of different loans, therefore you must be aware of the differences and the effects that this can have on your line of credit in the future.