Looking for a Short Term loan in the UK? Understand APRs and Interest Rates before you compare instalment loans on LoanTube.
If you have been searching for a short-term loan, then chances are you have come across the terms “interest rate” and “APR”. These terms can confuse people who are new to short-term finance, and if you don’t understand what they mean, you might not end up with a good deal.
That’s why LoanTube team have created this quick and easy guide to understand APR and interest rates. We’ll explain what APR and interest rates are, along with why it matters, and how to choose the right loan for you.
Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52. Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52. Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00 Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00 Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56. Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56.Maximise your options: Compare and apply for loans below with LoanTube
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Loan Amount
£4000 -
£20000
Norwich Trust
Loan Term
1 -
10 years
4.8/5
Representative APR
31.90%
Minimum Age
21 Years
4.8/5
Norwich Trust
Loan Amount
£4000 -
£20000
Loan Term
1 -
10 years
Representative APR
31.90%
Minimum Age
21 Years
Minimum Income
£2000 per month
Loan Amount
£5000 -
£100000
Evolution Money Loans
Loan Term
1 -
20 years
4.5/5
Representative APR
28.96%
Minimum Age
18 years
4.5/5
Evolution Money Loans
Loan Amount
£5000 -
£100000
Loan Term
1 -
20 years
Representative APR
28.96%
Minimum Age
18 years
Minimum Income
Not mentioned
Loan Amount
£1000 -
£10000
1Plus1 Guarantor Loans
Loan Term
1 -
5 years
4.4/5
Representative APR
39.90%
Minimum Age
18 years
4.4/5
1Plus1 Guarantor Loans
Loan Amount
£1000 -
£10000
Loan Term
1 -
5 years
Representative APR
39.90%
Minimum Age
18 years
Minimum Income
Not mentioned
What is Interest?
- Interest is an amount of money that you need to pay to a loan provider when you take out a loan in addition to the amount you actually borrow. This money covers their costs and makes sure that they can make some money by lending you the money in the first place.
What is an Interest Rate?
- Instead of a fixed sum, interest is paid as a percentage of the amount that you want to borrow. This is called an interest rate. The higher the interest rate, the more money you will have to pay in order to take out the loan.
What is APR?
- APR stands for Annual Percentage Rate. This is a way of calculating what interest rate applies to a loan that you are most likely to see when you are on a lender’s or a broker’s website. This tells you what percentage of the loan you will have to pay back in interest (on top of the amount you borrow) if the loan was to be taken out over the course of a year.
- The reason that APR is so helpful is because the vast majority of loan providers use it to advertise their services. This means it is much easier to compare deals than if everybody measured interest payments by the month. APR also includes any additional fees that you pay, so the percentage that you see is what you will have to pay.
How Does this Apply to Borrow Money?
- When you are comparing two loans, both of the loan providers will display the APR they are offering. This means you will be able to see right away which provider will charge you more to take out a loan. For example, a loan provider offering you an APR of 15% will charge you less money than a lender asking for 20%.
- Naturally, APR is only one thing that differs between loan providers because some may allow you to borrow more money and others might allow you to make the repayments over a longer period of time.
Why is Interest Important?
- Many people only consider the amount of money that they want to borrow when they are looking to take out a loan. It is always important to consider the fact that you need to pay the interest as well as the principal. This gives you, on most occasions, the total cost to you of taking out the loan.
What is Principal?
- Your repayments are made up of two different elements. These elements are the principal and the interest. The principal is the amount of money that you actually borrow while the interest is the money that the lender charges you for taking out the loan.
- Although the loan repayments are all the same size (typically), the amount of interest and principle in each instalment differs. The earlier instalments will have you paying more of the interest on the loan and less principal. As your payments continue, the amount of interest that makes up each payment decreases, and you start to pay more principal. This is called “amortisation”.
- This is because there is less risk of the loan provider losing money if they claim more of their interest earlier, as opposed to spreading the cost evenly across each repayment. For you, the recipient of the loan, you won’t be able to tell the difference because all of the repayments you make will be for the same amount.
What is a Representative Example?
- This is another number that you will come across if you have been searching for a loan. A representative example is the APR that most of the loan provider’s customers pay. In order for a loan provider to be able to display a representative example, at least 51% of their customers should have that rate available to them. This is a regulation so they have to be accurate when they tell you what their representative example is.
- Not only is an accurate APR required by law but lenders must also show you how much is going to be paid back as well as any other additional fees or charges that you have to pay. This is another way that you can easily compare what different loan providers have on offer.
Will you Get the Advertised Rate?
- There is no guarantee that you will be offered the representative example rate when you submit your application. This is because there are many different factors before considering somebody for a loan.
- For example, if you are looking to take out a loan for a longer period of time and you have a good credit score, then you are far more likely to be offered the representative rate. Additionally, you might even be offered a better rate if you have previously demonstrated that you can repay your loans in full and on time.
- So, treat representative examples and advertised rates as a rough guideline for what you might expect from a lender. Most lenders take into account your credit history and your current financial situation when they are deciding whose application they will accept and the kind of rate that they will offer you.
APRs and Interest Rates with LoanTube
- LoanTube is different. We try to bring you the cheapest possible rates (dependent on your personal financial circumstances) that are available amongst our partner lenders. Although we cannot guarantee that we will find you a lender, you really do have better chances of finding a suitable loan with us because we work with multiple lenders.
- How does it work? Our clever computer system compares real-time offers made directly by the lenders. This is all done in real-time and, once we have all the quotes, we will display the offers with their terms and conditions to you, as the same will help you take an informed decision. The APR that you will see in your window is the APR you will get.
- To start your application, please click here.
- While interest rates represent the cost of borrowing as a percentage of the loan amount, APR includes both interest and any additional fees, giving you the total cost of borrowing over a year.
