If you are looking to take out a loan it is important that you ask yourself how much would I pay on a loan? You need to make sure that you have the budget and finances in place to afford to pay off your loan, and if you don’t decide this at the start of the process, you may find that you are placing yourself into greater financial difficulties than you need to. Even if you need money in a hurry, you’ll find that taking the time to evaluate your finances and what a loan consists of will help you make the best decision for your needs.
When it comes to calculating how much you will pay for your loan, the APR is essential. While you will not know the exact APR you are offered until you apply, the representative APR offered by a lending company can provide you with a starting point to compare different companies. Not every lender is the same and the choice between different lenders may see you saving money on how much you pay each month or over the course of the loan.
This is why you need to pay particular attention to the APR as this will help you find the loan that is best for your needs.
Consider the APR when looking for the right loan
If you looked to borrow £2,000 over 48 months (a 4 year period) with a representative APR of 48.9%, you’ll find that you end up paying a total of £4,067.04 to repay the loan. This works out as £84.70 every month during the period of the loan.
Borrowing £3,000 over 36 months (a 3 year period) with a representative APR of 48.9%, you’ll end up paying £3,485.16 to repay the loan. This works out as £96.81 every month during the period of the loan. This will leave you paying over £12 extra a month with this style of loan but it will save you close to £600 over the period of the loan. This is why you need to think about the aspect that is most important to you.
If you are focused on paying as little as possible in the long term, you should look to pay off your loan as quickly as possible. If you are focused on having an affordable monthly payment, you may have to settle for paying more money in the long term. Knowing the APR will help you make the decision that is best for your needs.