December 4, 2022

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All you need to know about APR for Personal Loan

Desires and dreams are something that is never in our control. As we grow, our desires become our necessities and we dream for more. In such a situation what is in our hands is financial management, as money is the only way to open all avenues for your dreams. The question remains how do we manage the money?

is the lack of funds holding you back? Do not put your dreams on hold. Not anymore. Financial institutions have come up with a great way to finance all your emergencies with a Fullerton India personal loan. While loan approval is easy, it is the various loan terms that create the problem. You should consider the APR.

What is APR?

APR or Annual Percentage Rate includes the interest rates and financing fees associated with the loan and its repayments. It generally depends on the type of loan, amount of loan being borrowed, the repayment tenure and your credit history. 

Difference between Nominal Rate and APR?

The amount charged by the lender on a loan as its interest is the nominal interest rate. It does not include the processing fee, pre-closure charges, penalties etc. In actuality, APR or Annual Percentage Rate is the sum that incorporates the nominal interest rate, handling expenses, punishments and any remaining charges that are appropriate to the credit. Since this rate is a mix of the multitude of instalments that you need to make against your advance across a year, it is higher than the ostensible financing cost of an advance.

Benefits of APR over Standard Interest Rate

APR has its focal points over the standard financing cost of an advance. Here are the advantages of APR against the fundamental loan cost for your ease of reference:

  1. A Standard calculation tool: APR provides a precise value of the financing cost, based on which the borrower can make their final decision. The borrowers can also compare the interest rate charged by various lenders and find the most competitive loan in the market.
  2. Know the actual cost: Different organizations have varied loans and other financial products, in terms of charges, waivers, fee structure, penalties, and other factors. APR is a standard figure which makes it easier for the borrower to understand the actual cost of the loan.
  3. Comparing loans: The APR makes it easier for the borrower to compare the loan terms of each lender and accordingly finalize the one that is more convenient for them.

What factors does APR depend on?

The APR is never fixed, it can vary for different lenders. Loans are either secured or unsecured and the nature of the loan impacts your interest rate, repayment tenure, and other charges. To know more about what affects the APR, let us see the kind of personal loans available.

Secured Loan

When the borrower pledges some security for the loan amount, it is known as a secured loan. As the loan is secured the APR is also low, which means that you can repay your loan amount easily.

Unsecured loan:

Contrary to the secured loan, an unsecured loan does not require the borrower to pledge any asset to secure the loan. As it is a high-risk loan, the APR is also high, thus causing higher repayments.

Conclusion 

APR is a great tool which makes the loan affordable or expensive. Which is why it is important to check the APR before applying for a loan. Along with finances also consider the repayment of the loan carefully. The APR will be a great tool for borrowers to make the right decision about the loan and choose the lender offering the best service