Guarantor loans APR’s explained
APR stands for Annual Percentage Rate and is usually applied to financial products like loans, mortgages and credit cards.
It is designed to give the potential borrower an indication of the overall cost of the debt (loan) you are taking on so with a guarantor loan for example, the APR will consist of the annual interest rate and other charges such as lender fees, admin fees and/or broker fees. The final APR rate will then allow you to compare the loan to others on the market.
Why APR’s are not always the best way to base loan decision on
Because the way an APR is calculated, it is naturally greater when talking about large loan over a smaller period of time. Therefore a £5000 loan will have a higher APR than a £3000 loan over the same period of time.
Does it tell you if the loan is affordable or not?
No it doesn’t. The only way to determine if the guarantor loan you are applying for is right for your needs is to work out what you would repay each month and see if that fits in with your monthly budget. If its stretches you financially then you should not consider a loan with a guarantor or any other type of loan as taking on such a commitment could cause you financial hardship.
