What does Annual Percentage Rate, (APR) mean
12 April 2023
By Joy Pearson
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If you're in the market for a new car, you may have heard the term "APR" thrown around when it comes to car finance. But what exactly does it mean and how does it relate to the rate you get offered? In today's post, we'll take a close look at APR and its role in car finance.
APR stands for 'annual percentage rate'. In the world of car finance, it refers to the total cost of borrowing money for a car loan over the course of the year. This includes not only the interest rate, but also any additional fees or charges associated with the loan.
When you apply for car finance, the lender will consider a variety of factors to determine the APR they offer you. These factors may include your credit score, your income, and the length of the loan term. Generally speaking, the higher your credit score the lower your debt-to-income ratio, the more favorable the APR you'll be offered.
The APR you're offered can have a significant impact on the total cost of your car loan. A higher APR means you'll pay more in interest charges over the course of the loan, which can add up over time. That's why it's important to shop around and compare offers from multiple lender to find the best APR for your situation.
It's worth noting that the advertised APR for a car loan may not be the rate you end up with. Depending on your creditworthiness and other factors, the lender may offer you a different rate than the one advertised. That's why it's important to read the fine print and understand the terms and conditions of any loan offer before accepting it.
When you find yourself in the market for car finance, APR is an important factor to consider. It represents the total cost of borrowing money over the course of a year, including interest and fees. The APR you're offered will depend on a variety of factors, including your credit score and income. Be sure to shop around and compare offers to find the best APR for your situation, and read the terms and conditions carefully before accepting any loan offer.