Representative APR Meaning
In the world of finance, the representative APR is an integral concept. This is the rate which lenders use to advertise loans, credit cards, as well as other credit products. It not only includes the interest, it also includes all compulsory charges and fees.
This rate is offered to at least 51% of applicants for a specific product, hence the ‘representative aspect.’. However, it’s essential to remember that not everyone will be offered this rate.
Depending on your credit score and personal circumstance, the exact APR which you are offered can vary.
A lender’s representative APR can be fixed or variable. Whereas a fixed APR stays the same throughout the loan term, a variable APR can change based on the lender’s criteria.
Factors Influencing Representative APR
Several factors can influence the representative APR offered by a lender. These include:
– Credit history: Your credit history provides details of how you’ve managed credit in the past, including late payments and defaults. Lenders will then use this to assess your reliability as a borrower, consequently determining the interest rate and fees which you will be offered.
– Credit score: The higher your credit score, generally the lower the APR.
– Loan amount and term: The amount you want to borrow, as well as the length of time you want to borrow for, can also affect the APR you’re offered.
It’s worth noting that representative APR is not guaranteed. The actual APR offered may be higher, particularly for those with bad credit history.