What does APR mean? You might be asking yourself this question as you may have noticed the abbreviation APR everywhere on any financial lending website. Well, it stands for Annual Percentage Rate (APR) and is something that is extremely important to understand for any loan you may decide to have in your name.
So, what exactly does it mean? Here we’ll discuss all the different terms associated with APR and why exactly it affects you, so continue reading to find out more…
An Annual Percentage Rate (APR) is the total cost you pay to borrow the money for the year. APRs change per product, company and person, so it’s always important to seek this information out. The rate of your APR for car finance with us will firstly be decided by your current credit score. So, if you currently have bad credit that might be why you are paying a slightly higher APR on top of your original loan.
A representative APR is often used by customers to compare lenders against each other. When a loan is advertised with a representative APR, it means that at least 51% of customers receive a rate that is the same as or lower than the representative APR.
Our current representative APR is 31.9%, but your loan for a car or van could have an APR between 14.9% and 48.9%.
When you apply and we learn more about your circumstances, an APR is applied to your loan. This can be the same, lower or higher than the representative APR. It’s important to know that your APR may not be the same rate that someone else gets. This is due to your individual financial circumstances including your credit score.
When you use the vehicle finance calculator on our website and put in all your relevant information, it will detail how much your monthly repayments could be, how much you will repay in total (which will include the APR), and what the APR will be based on how much you are wanting to borrow. It’s important to know that the calculator will only be able to give you a rough estimate, and that you will need to apply to be given an exact APR.
For example, if you borrowed £12,000 for a vehicle and you wanted to pay this back to us over 55 months with a ‘fair’ credit score. Your agreement would look something similar to the below:
Monthly payment: £393.20
Total to repay: £21,232.80
Calculated APR: 31.9%
(Correct as of the 20 June 2022)
We can only offer you an APR once you’ve applied and we have all the relevant details, but don’t worry your initial application will not affect your credit score.
Representative example: £11,015 repayable over 57 months. 56 monthly payments of £354.47. Representative 31.9% APR. Total amount payable is £19,850.32. Subject to affordability and you could risk losing your vehicle if you do not keep up payments.