When you are choosing a car finance deal then you need to look very carefully at the APR. APR stands for the Annual Percentage Rate and this will indicate how much the lender will charge you for the money you have borrowed. Ideally, you will be looking to get a good APR rate deal as this should lower the overall costs of the loan.
Compare Similar Loans
The important thing to remember when shopping around for APR-based loans is to compare ‘like for like’. This means you need to get a quote from each lender for the same amount of money for the same terms.
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For example, if you want to borrow £3,000 over three years then you need to ask the lender what APR they can offer you on these particular loan parameters. You also need to check the total amount you will be repaid. These details will help you to compare APR-based loans offered by different lenders so that you can make an informed decision about which loan would be best for your financial circumstances.
Also, check with the lender exactly what your monthly repayments will be with the interest and fees included. Don’t forget that if you need to borrow £3,000 then you will have to pay back more than this in total once you have added the interest and fees. This is why it is important to get the best information that you can as this will enable you to make the right decision that suits your circumstances.
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Variable and Fixed Rates
APR-based loans can come in both fixed and variable rate packages. Fixed rates are more suitable for those people with tight budgets. When a loan is fixed you will know exactly how much you need to pay each month and this makes it much easier to plan your finances. Although variable rates could potentially be cheaper (if interest rates go down) because they can change on a monthly basis you may find it difficult to manage your finances as effectively. Some months you may have to pay slightly more and some months you may end up paying less. The most common type of borrowing on a variable rate basis is credit cards.
Terms and Conditions
The terms and conditions that you will agree to when you sign up for an APR-based loan are extremely important. You need to understand exactly what you are signing up for when you agree to take out a loan. The small print will contain the details of both your and the lender’s responsibilities for this financial commitment.
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