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What is the Annual Percentage Rate (APR) On Personal Loans?
The APR was introduced as part of the Consumer Credit Act of 1974. It is the only way to
properly compare the difference in charges between all the various lenders.
The advertised interest rates quoted by lenders of mortgages, credit cards or
personal loans normally only state the rate of interest that you are expected to pay
each month or each year. However, since different lenders have differing methods of
calculating interest it can be very difficult to make a comparison between the various
products. This is especially difficult in those instances where interest is calculated
over different periods (e.g. monthly or daily).
In order to make a proper comparison you should consider the APR. This will be
quoted by all legitimate lenders and is usually displayed on adverts in brackets next
to the headline rate.
The APR is a means of considering the total amount of interest payable over the whole
term of loan regardless of the timing of when the interest is calculated and allows to you
compare different loan products. When calculating the APR the lender must take into account
all charges you would be expected to pay, as well as the interest that is due on the loan.
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