A majority of people are not going to have the luxury of paying for many things in cash so they will have to find some sort of loan. At times people pay for cars with money that has been saved up but for mortgages people almost always have to find a lender willing to give them the loan. APR or annual percentage rate is the interest that is accrued during the lifetime of the loan. Depending on a variety of factors the APR can vary immensely as high risk loans carry a much higher percentage rate than people who always pay their loans back or bills on time. The following are steps that can be taken to get the best APR on personal loans regardless of what you are getting the loan for.
APR And How It Impacts Your Loan
The easiest way to explain APR is having a borrower get a loan for $1000 at 6 percent interest. Over the course of the year the interest will accrue to $60 if no payments need to be made during that first year. While this seems like a small amount people that borrow $200,000 for a mortgage at around 4 percent APR can pay $8,000 worth of interest during a year if the principal amount stays at $2+00,000 for some reason. The higher the APR the faster a debt can climb with some credit cards having 25 to 30 percent interest rates for those people with low credit scores. Credit cards also might charge daily interest on a loan so dividing the rate by 365 or 360 can allow you to see the daily rate you will be paying once you multiply it by your current balance. Some credit card companies do this by 360 for 12 months of 30 days while others do it for the entire year or 365 days.
Improve Your Credit Score
If you do not know your credit score but occasionally do not pay credit card bills on time or have debts sent to collections your score could be much lower than you think. Checking your credit score is the first step as there could be outstanding debts negatively impacting your score that you can pay off immediately. With all of the scams out there today so verify that the money is owed currently. Otherwise you could pay off a debt that you never had or have already paid. Many companies can make mistakes so it is vital to keep receipts of payment at least in a digital form. Most credit card companies and banks will attest to a client paying a bill as they will have the transaction ID along with the amount charged. People with low credit scores do not demonstrate that they will reliably pay the loan back so the APR is hiked. This helps make sure that the lender makes their money back as fast as possible before the borrower defaults on the loan.
Building Credit
A monthly credit card that automatically withdraws money to pay the full amount of the balance can be a good way to improve your credit. There will be those that say paying your entire balance can harm your credit but this is just in the case of those people with impeccable credit scores. Getting a great rate on your loan will depend on your credit score as well as how on top of you are at paying other loans you might have. Those people that are overextending themselves financially can fall behind on payments thus devastating their credit score. Do not continually carry a lot of debt on your credit card as a missed payment can lead to your interest rate skyrocketing.
Taking the time to get the best APR on your next loan should be a priority. This can make your payment structures more manageable as well as save you thousands of dollars in interest. Do not underestimate the value of waiting until you are financially healthy to apply for a loan. Lenders are going to want to work with you if you have great credit and zero debt otherwise.
