Guide to APR
Car finance can be confusing but at Smallbone and Son, we want to make it simple. That’s why we have put together our no-nonsense guide to APR…
APR stands for Annual Percentage Rate and measures the amount of interest you pay on a finance agreement. It’s a way of showing how much you will pay back, and it is calculated using a formula from the Consumer Credit Act (1974) and every lender follows this formula.
What’s an interest rate?
An interest rate is the amount you pay on top of the borrowed amount. It’s normally displayed as a percentage in the form of APR and lets you know what borrowing the money will cost you over the course of your agreed time period.
What does ‘representative’ mean?
No doubt you will have noticed that APR as displayed as representative during your finance search. It’s another word for example but in order for that rate to be advertised, it has to be achievable by at least 51% of customers.
Why is APR so important?
APR rates will protect you from sinister deals and paying over the odds for car finance. It also lets you compare deals fairly, so you can find the one that’s right for you.
What affects the APR rate you can get?
There are many different factors which will have an impact on the APR. All in all, it boils down to your credit rating and if you have bad credit, you are classed as a bigger risk. This can lead to a higher APR but not always, and more often than not, you can get finance even if you have bad credit.
There’s our starter guide to APR but if you have any other questions, please get in touch with a member of the team at Smallbone and Son.