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Representative Example: £1,000 borrowed for 18 months. Repayment of 17 Months at £87.22 and final repayment of £87.70 The total amount repayable is £1570.44. Interest amounts to £570.44, an annual interest rate of 59.97% Representative APR: 79.5% (variable).
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Short term loans low APR
Many people look for short-term loans low APR but these are usually quite high APR loans due to them being paid back over a short period. When facing a financial emergency and all other options have been exhausted. You may notice, when comparing short term loans online, that some have a higher APR when compared to the long-term options.
Annual Percentage Rate (APR) is an official and standardised rate that a lender will use so you can identify the cost of the loan. This will differ from one lender to the next, as they all have their own interest rates and charges. It is a legal requirement that a lender advises you on the APR before you sign any agreements. Of course, the lower the APR, the less the loan will cost in the long run.
How is APR calculated on a short term loan?
APR is an annual rate, which is calculated to show you how much it costs when borrowing funds for twelve months. A loan that is longer than twelve months will be calculated by adding the total loan amount with interest and fees and then dividing it by a twelve month average.
Short term loans are different, as they are borrowed for short periods of time, usually around three months. This means that the loan is less than twelve months. The APR is calculated on the total cost and multiplied to give an annual average. As a result you will find that the APR on short term loans is higher than a longer term personal loan, taken over five years, for example.
What is representative APR and typical APR?
When comparing short term loans low APR you will come across representative APR and typical APR and knowing the difference can help you select the right short term loan to meet your needs. APR is standardised, enabling you to compare one APR to the next. Different loans are influenced by factors that are specific to their terms and your circumstances.
Typical APR is offered by two thirds of borrowers and is the APR most people are offered as new customers. Representative APR is what a large percentage of borrowers are offered, especially when you are a repeat customer. This is a lower APR as you have shown you are responsible in repaying your loan on time.
When you display a good borrowing behaviour with a lender, you should receive a short term loan with low APR if you borrow from them for a second time.
What will make my short term loan expensive?
When you make repayments and stick to the payment scheduled, which is stated in your credit agreement, you will never pay more than the agreed amount you signed for. When you start missing repayments, it will get expensive. Missed payments often incur missed payment fees and other charges.
When you don’t make your payments on time, you are extending the amount of time it will take you to repay the full loan, which leads to more interest being added to the amount outstanding. Short term loans are not designed for long term borrowing, so missing a repayment can get expensive quickly if you slip up once or twice and miss a payment.
Lenders in the UK collect their repayments automatically on a day you select, using a continuous payment authority (CPA). You will agree to this when applying for your short term loan low APR. In order to keep the cost of your loan down, ensure there is enough funds to cover the repayment on the scheduled day.
There are times when you may face financial problems and many lenders have payment plans in place to assist customers who are struggling. They will work with you on your short term loan with low APR and help to find a fair resolution, such as freezing the interest and ensuring you do not incur any additional charges, as long as you keep them updated on your situation.