Loan Period
What is a 'loan period'?
A loan period is the agreed time that you agreed to borrow money for. On a personal loan that's normally within the six months to ten year range. Similarly, an unsecured loan would normally run from five years to twenty five years. A mortgage, more routinely runs in the twenty five year range.
What is a 'repayment term'?
A repayment term is the period of time that you have agreed to repay the borrowing over. That can be anything from very short term, a repayment term of six months, or it can be very long term, a term of twenty five years.
How long can a repayment term be?
A repayment term can be very long term. If you're borrowing a significant amount of money you might want to repay a debt over a long period of time. Therefore, twenty-five years for a mortgage is not unusual. If you are also consolidating significant amounts of debt that you've acquired, you also want to do that over a long period. Each lender will have different rules for how long they're prepared to lend for. That will be then reflected in a different interest rate.
What is an Annual Percentage Rate APR?
Annual percentage rate is defined in law. It's defined in both the consumer credit act, and also by the financial services authority in terms of how borrowing is calculated. A borrower must always take the interest rate plus any fees that apply specifically to the loan, and use that to come up, through a mathematical calculation, with an annual percentage rate. That rate can then be used by consumers to compare one loan against another. It's very important always to get the APR from any lender before you make a decision on borrowing, compare these, and look for the lowest annualized percentage rate in order to make your decision to borrow.
What is a good APR?
Good annualized percentage rates are the lowest figure possible. This theory's depending on the type of loan market we are talking about. A mortgage annualized percentage rate; a good rate would be down in the low 6% figure, but depending on your individual credit rating can go up to around 9 or 10 percent APR. In the secure market , a good annual percentage rate tends to be around the 7.5% or 8% figure. Any rate that might be more applicable to people who've got poor credit histories would be in the 15% range. When you get into the unsecured loan market, the interest rates range around the same type of figures. Until you get into the overdraft market, which would be higher than that and the credit card market terms you would see annualized percentage rates going from around the 9%, 10% figure up to 25% and all the way through to 50% .
Can I shop around for different APRs?
You should always shop around for different APRs and try to find the lowest APR that you can get, given your personal circumstances.
What should I be aware of when comparing APRs?
The things you should be aware of when comparing Annualized Percentage Ratios (APR's) is to check whether all the right things are included, and to ask questions regarding the interest rates and processing fees that might be included in the APR.
How often will my loan need to be repaid?
You will only repay your loan once and you will normally repay that at the end of the term. However, you can repay your loan early if you wish, but you have to be careful within the terms of the contract in that there may be what are called early redemption charges. You could be charged a fee for repaying the loan early. You should make sure that you know about that before you start taking out the loan, and ask questions about that if you think you may be repaying the loan early.
When shopping around, should I look at APR or interest rate?
Both figures can be important. Lenders tend to use the headline rate, the initial rate, to get people through the door in terms of their advertising. However, what we must do is show the APR. It is the APR that is the important thing in determining what the best deal is. Therefore, you should always look for that APR in making the decision as to which loan is best for you.
