What is the difference between APR and Interest rate on a personal loan? This is a question many homeowners ask when deciding on a mortgage or home equity loan. There is a big difference in the two and you need to be aware of it before signing on any papers. APR stands for Annual Percentage Rate and is the interest you will pay on the loan. Interest rate is simply the amount of interest that will be added on to the balance of the loan.
APR is calculated with all necessary fees included. There are two types of fees that are included with personal loans, origination fee and service charge. The origination fee is charged by the lender as a service and is not applied to the balance of the loan. This fee varies from lender to lender and is often non-refundable. Service charge is applied directly to the borrower and is usually non-refundable.
Most mortgage lenders have their own individual policies about what is the difference between APRs and Interest Rates on personal loans. There are even lenders who specialize in loans for certain types of credit scores or loan profiles. Shopping around for the best personal loans lender is sure to yield the best rates. If you are planning on applying for a mortgage, you should do your homework and request quotes from various lenders. You may want to check out several lenders sites to compare APRs and Interest Rates on different loan profiles.
The first thing you should understand about APR and Interest rates on personal loans is that personal loans with variable interest rates are usually more expensive to deal with over time. You can use a fixed interest rate for a short term while but if your interest rates rise later on, it can be very difficult to make up the difference. When comparing APR on a variable rate loan, you want to look at the annual percentage rate and not just the interest rates. Some mortgage companies will list the Annual Percentage Rate along with the interest rates but you want to look at the Annual Percentage Rate alone and not just the interest rates.
To understand the relationship between APR and Interest Rate on a personal loan, you must know how to read a credit score report. In general, if you have an acceptable credit score, chances are good that the APR on your personal loan APR’s will not be as high as it would be if you had less than an acceptable credit score. However, keep in mind that if you do have a low credit score, you still have the potential to pay more for your loan. Lenders do not consider all applicants equal and your credit score is a big factor when determining your loan interest rates. If you do have the opportunity to refinance your personal loan APR, make sure that you do so if your credit score is still above the average level.
The main reason why APR and Interest Rate on a personal loan differ is because credit score plays such a huge factor in determining what interest rates a lender will offer you. Although APR and interest rates do vary from one company to another, it is important to remember that lenders base their loan offer APR on the information contained in your application. If you are able to prove that you are an excellent customer who makes all of your payments on time, chances are good that you will get a better loan offer from a lender than if you make all of your payments late. Keep this in mind when applying for personal loans and if you need to lower your interest rate, it is important that you are able to do so without having to destroy your credit score. There are many other ways to lower your interest rates; however, if you are unable to do so without destroying your credit score, then it may be best to apply for another loan.