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Avail any financial opportunity, and the representative Annual Percentage Rate (APR) comes forward in your notice. It is unavoidable as, without it, you cannot know the total cost of the deal. It has the efficiency to affect your decision. Most of the borrowers are ignorant about it, which makes them fail to take the right type of choice.

Something that is so dominatingly important in the lending industry should be in your kind knowledge. Isn’t it? Here are some relevant and useful points that you should know about the APR.

START with the basic definition

Representative APR is the percentage of the rate that includes all the charges and the interest rates applicable to a financial product. It gives you the idea (not exact) of the total cost of a loan product.

NOW the critical facts about the representative APR

After an introduction with the basic concept, it is now time to know the bigger picture of APR.

The advertised APR % by the lender is not applicable on all loan amounts

Yes, this is true. Every finance company puts an APR on the website to give an idea or MORE OR LESS total cost of the available loans. Forget not to focus on ‘more or less’ as it is its ultimate nature. As a borrower, you should not complain to the lender that they are not getting the displayed rate quote.

The mentioned one is the hint of the overall cost that one may need to pay. Never take it as the final thing as every loan deal is prone to changes according to the individual circumstances of the borrower. In short, the advertised APR may always vary from the actual one that you get.

The rule to apply APR on a loan

There is an essential procedure to use the APR on a loan product. Through example, it is easier to understand how it works. It is added to the loan every month.

Example –

  • You apply to a direct lender of unsecured personal loans, and the amount is €1000.
  • The APR is 12% ( assume)
  • The yearly cost will be €120
  • As the APR is applicable monthly, according to the 12% the monthly rate will be 1%

This is the only way to implement the APR on the loan products, and all kinds of loans come under this process.

Is there anything like ‘good APR’?

Of course, it is there. There is always a prevalent confusion that what exactly a good APR is.

To be precise on this part, the good APR is what where the rate lower than the 20%. Any financial product above this gets the tag of the expensive deal.

The higher APR usually goes with the products like credit builder cards. They are available on the APR between 23% and 50%. Also, the credit cards that commit glittery rewards on spending usually have higher Annual Percentage Rate.

Things you need to get the lowest APR

Attainment of any loan, credit card etc. on the lowest possible rate depends a lot on the conditions of your finances.

Following are the factors that are necessary to act to get you the best suitable APR:

  • Good credit score – There is certainly no need to explain how important credit rating to bring you desired money opportunities.
  • A Big figure of income – A good hefty income is the most critical factor that helps to prove repayment capacity. If that is satisfactory, it is always easy to get a lower rate.
  • Idol debt-to-income ratio – Maybe your income is good, but your debts dominate the income. In that case, it can be challenging to convince the finance company to make changes and get a required deal. The idol ratio for some companies is 60:40, and for some, it is 70:30.

These prime factors are the game changers if you want to get the APR that suits to your efficiency.


From small to big decisions on money matters, getting approved for any product demands consideration of APR. That can happen only when you know the term and also its role in the deal you get. The above information will help you make the right turn at the right time. When you know about the more significant aspect, the smaller ones naturally get clarity.

Besides, every person should be financially literate as that is unavoidably vital to have a better tomorrow and future. Agree?

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