When looking for a loan, one of the biggest factors to consider is the level of loan APR that you are being offered. Although there are many other things to consider, the basis of the price of a loan is the APR. If you are looking for a loan, then this is the first thing you should consider when weighing up your options. If you are unsure about loan APR, then here are some tips to help you begin.

What is APR?

APR stands for Annual Percentage Rate, and is the amount of interest you are charged on a loan amount each year, written in the form of a percentage. For example, if you borrowed £1,000 and the loan APR was 5%, you would pay £50 a year in interest for the course of the loan. Obviously, the lower the APR, the cheaper the loan will be, if all else remains equal.

What APR level to look for?

Obviously, the level of APR that you should be looking at really does depend on the amount you want to borrow, the type of loan you want to go for, and your financial circumstances. However, a good rate for an average unsecured personal loan for someone who has good credit would probably be around 6 or 7%. However, rates will vary greatly depending on what you want.

Comparing APR

To work out which loan is best for your needs, you should compare the various APR rates of each loan offer. This can be done by collecting the information yourself or by looking at various web sites that allow you to compare different loan rates at once. This will allow you to see the rates for the particular type of loan you want and which company has the most competitive rate.

Not all about APR

Although APR can be incredibly important, you should remember the other factors involved in choosing a competitive loan. These include extra fees and charges, as well as the length of the loan term. Having a low APR over a long period may save you money in the short-term on payments, but you may end up paying more than you would on shorter loan with a higher APR.

Look at the total costs

As well as looking at the APR, you should look at the overall total cost of the loan. This will tell you how much you are going to pay back in total, and will also help you to decide whether or not a certain loan deal is right for you.

APR can change

Another thing to remember is that unless you have a fixed rate loan, your APR rate can change over time. It may go down, but it is probably more likely to go up. This can affect the amount you pay back, so it is worth looking at all the ins and outs of APR before committing to any loan deal.