What Is An APR,

What is an APR, APR is a term you will see on several different lending products. Until March 2016 it was used with mortgages, credit cards and loans. APR - Short for Annual Percentage Rate, it's a legal requirement for APR to be shown on personal loans, credit cards and hire purchase agreements so that an easier and fairer comparison can be made. APRC - This stands for Annual Percentage Rate of Charge and is now used for mortgages, including second charge mortgages (i.e. secured homeowner loans). The representative APR (formerly known as Typical APR).

So, an APR or APRC basically shows how much your borrowing will cost over the period of an average year, over the term of your debt. They take into account the interest charged as well as any additional fees (such as an arrangement fee on a mortgage or an annual fee on a credit card) you'll have to pay.

They also consider the frequency with which interest is charged on your borrowing, as this has an impact on how much you'll pay as well. Using an APR or APRC can be a more effective way of comparing financial products than just using the rate of interest charged. That said, it can also be more accurate to compare the actual interest rates and fees you are being charged to determine what you will pay. This is pretty straightforward: a personal APR or APRC is what you will pay.

For a mortgage this will be the same as the advertised APRC, as with a mortgage you can either have it or you can't. If you can have the mortgage, the rate doesn't change depending on your credit score - which it may do with a credit card or a loan.

When you are accepted for a credit card or loan you should check the rate you are actually being charged, as this could be considerably different to the "representative APR" quoted on any advertising. The rate of interest you'll pay on credit products is decided by your credit score and status.

However, in order for these products to be comparable prior to application (as you'll never know what rate you'll get until you're accepted), they are required to display a "representative APR/APRC" in advertising. A Representative APR is an advertised rate that a minimum percentage of customers will pay. This minimum percentage is 51% of the people who are accepted for the loan.

So nearly half of all those applying for a credit card or personal loan could pay more than the representative APR being advertised. For personal loans, the representative APR may well differ depending on the size of the loan (for instance, 15% APR for loans of £1,000 to £2,999, and 10% APR for loans of £3,000 to £4,999).

Therefore, it's important to only compare representative APRs on the amount you need to borrow, rather than on the headline representative APR, which may not be available on the loan you need. Remember, in order to secure a mortgage, credit card or personal loan you need to have a good credit rating. To find out if yours has a clean bill of health, contact a credit check provider to investigate your credit report.

“Revolvers,” in credit-card industry lingo, are consumers who carry a balance on their credit cards from month to month. They accrue interest on their balances, which adds to banks’ bottom lines. “Transactors” are far less profitable because they simply use their credit cards as convenient tools for making purchases and possibly earning rewards. Transactors pay off their balances in full and on time every month. The only money creditors earn from these consumers comes from interchange fees.

Transactors get a free ride from the card’s interest-free grace period. Some even make money from credit-card sign-up bonuses. “Banks covet cardholders who revolve balances while paying their minimum payment on time,” says Kevin Haney, who spent more than a decade as a sales director at one of the big three credit bureaus.

“Revolvers are far more profitable than transactors,” he says. ] offers represent the most cost-effective way to increase revolving balances that generate interest revenues. Everyone goes into a 0% balance transfer offer expecting to come out ahead, but will they, “Banks track and measure results of these offers, and know from experience the percentage of people who will win or lose the game,” Haney says.

“Winners take the offer and repay the balance in full before the introductory period expires, or they take advantage of another 0% offer and transfer the balance to another bank. If you want to come out ahead from transferring a high-interest balance to a card that offers a temporary 0% rate, understand that the credit card companies aren’t rooting for you to succeed. Read and understand the balance transfer offer’s fine print; it’s also a good idea to comb through the credit card issuer’s website for additional information on how it handles balance transfers.

There is a new way to save yourself a lot of money over the next few years. Believe it or not it is through 0 APR credit cards. Today many people pay interest on their credit card balances. And, as most of know, these balances can seem to continue to grow, when interest is added, especially if we are only sending in the minimum amount due. In some cases the balance may never be paid off.