The Cost Of Guarantor Loans
Just like any type of borrowing money, cost is one of the most important considerations when applying for a guarantor loan. The factor that will give you a rough estimate of your loan's cost is the Representative APR.
APR or annual percentage rate is the financial concept used by majority of financial lenders to advertise their product's cost. In general, the lower the APR, the more affordable the loan will be. But there is more to the concept than looking for the deal with the lowest APR. And the key word to look at here is representative.
As advertised, APRs are just representatives and therefore not the real cost of the loan. There are also two types of APRs, fixed and variable. Fixed APRs mean that the interest rate is unchanging throughout the duration of the guarantor loan's terms while variable APRs vary month after month. When the APR is variable, it is usually higher than what was advertised.
To illustrate further, let's say you want to borrow £3000 which you want to repay for 3 years. If the interest rate per annum is variable at 40.58% and the representative APR is variable at 48.9%, it means that your monthly repayment due will be roughly £145 or £5,226 in total. Take note, however, that the APR is variable so it will change from one month to another.
To ensure that you're getting a good deal out of your guarantor loan, it's best to understand how APR really works. You can learn more about the concept at Money Facts. It is also recommended to look for fixed APRs. That way, you know exactly how much interest you're paying for every month.