loan rates
Something You Should Know About Loan Rates
Not everyone needs to borrow money from a bank, and it’s true that you should be wary of acquiring personal debt if it’s possible. However, you might want to make an extra special purchase that requires a bit of extra capital. Buying a car, for instance, is a common occasion when people call on borrowing to afford a special purchase. One problem for inexperienced borrowers is that they don’t know the technical jargon before taking out a borrowing option, and they often take the first product that’s pushed onto them. Here’s a quick run through about what you need to know before you take out a loan.
When you borrow, you’ll be quoted a percentage figure with ‘APR’ next to it. This stands for Annual Repayment Rate. It’s the rate of interest you’ll pay annually to a bank or other lender for a loan on top of the outstanding balance of your sum.
So, as a quick example, let’s say you borrowed £10,000 from a bank, and you had an APR of 10%. If you paid this off over one year, in monthly instalments, then you would pay back a total of £10,549.91 at £879.16 per month.
If you chose to pay off the same amount at the same rate over 10 years, however, you would pay back a total of £15,858.09 at £132.15.
Out of the two the second one may sound more appealing, because you’ll be paying less money a month for the loan. However, over the long term you’ll be paying ten times as much for your loan, which is obviously bad. The message here is that you want to get the lowest possible APR available, and repay as much of the loan as possible in a short period of time. If you chose not to do this, then your lender will be making more money out of you than it should through interest. You should especially try and overpay monthly instalments on long term loans, such as mortgages, because this will cut your long term interest costs. Take a look at Alliance and Leicester for loans with some of UK’s most competitive rates.