Personal Loan APR vs Interest Rate: What's the Difference
Today we are going to cover a distinction that many people do not have a solid foundational understanding of. This distinction is between the personal loan APR and the interest rate of a loan. According to Gallup well over 50% of Americans do not have a basic level of financial literacy. Part of this lack of knowledge and education consists of people not having the awareness of the difference between these two.
The personal loan interest rate and the personal loan APR (which stands for annual percentage rate) are different because the interest rate is the percentage of the loan that you are being charged for borrowing. Other types of fees that are associated with the loan and the process fall into the category of the personal loan APR.
1. Why it is Important to Understand the Distinction
Unfortunately most consumers do not have the financial literacy to fundamentally understand the difference in terminology in the world of finance. When a person is in need of a personal loan and they do not fully understand the terms and conditions they are subject to pay an excess of fees, costs and rates. By reading blogs and informational materials such as the ones we provide as a community service here at Gold West Financial you are preparing yourself to be able to make the best choices to ensure the financial success of your future.
2. Understanding the Personal loan Interest Rate
The personal loan interest rate is predicated and based on the total sum of the loan. This figure is based on the principle sum that you are borrowing. The interest rate can be either a fixed interest rate or what is called a variable. The fixed rate remains the same for the life of the loan while the variable is can change over the course of the loan. When looking for a personal loan it is important to take these figures into consideration and know them ahead of time. Generally speaking, fixed rates are more simple since they do not consist of any changes.
3. Understanding the APR
When it comes to the Annual Percentage Rate or APR on the loan remember this combines the interest rate as well as any other fees that are associated with the loan. Keep in mind that most lenders will also add upfront charges to the loan that are usually known as origination fees. These will be considered part of the total cost of the loan. Remember, lenders must disclose a loan’s APR legally speaking according to the Truth in Lending Act.
4. Getting the best Personal Loan APR and Personal Loan Interest Rate
Like with most things in life that have to do with finances it is important to consult with experts who understand the field and are experienced. Remember to ask questions regarding rates, look through paperwork and make sure you are working with a credible and reliable company.
One of the services we provide all of our clients at Gold West Financial is the access and attention from our well versed team that is trained to handle questions regarding the dynamics of personal loan interest rates and personal loan aprs along with other subject matters.
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