What is Annual Percentage Rate on a Personal Loan?

Apparently, annual percentage rate is a term used for financial products such as mortgages and credit cards. Like most rates, the annual percentage rate is pretty commonly measured. What makes it stand out from other kinds of rates is that it’s measured in percentage (yep, the term “annual percentage rate” doesn’t lie). 

In particular, this kind of measure is applied to personal loans(although it’s safe to say that one can compare any product with APR with any other product having similar qualities proportionally).

Personal loans are installment loans, meaning your interest rate won't change over the loan term, and you pay the loan back in equal monthly installments. Lenders assign an interest rate based on your credit score (how trustworthy you have been with previous lenders), credit history (which lender you've had a relationship with before), as well as other financial factors mentioned above.

Personal loans are stories that don't have a definite ending. In fact some might say they would start from one point and end in another whereas others would argue that it isn't logical to assume how the story remains unfinished. 

Regardless on how you feel about your personal loan, when it comes down to knowing the facts about personal loans, there's really not much left to question because you're probably wondering if there are any hidden traps or risks involved with getting a loan in the first place. 

There is no doubt that understanding your credit score and income related figures is extremely important but underestimating the importance of having an overall idea of APR can be dangerous at times and will definitely blindside you once you do decide on applying for a loan in particular.

Personal loans may come with an origination fee, which is a one-time charge for borrowing money. The amount of your interest fee depends on the level of credit risk presented by you , and the amount and term of the loan requested. 

Lenders will consider a number of factors when determining your level of risk, such as your credit score, income and whether you have a good savings history. The higher your level of risk is determined to be, the higher your fee can be because lenders need to protect themselves against taking risks in case you are unable to pay them back. 

Personal loans are often amortized over a set period lasting 5-30 years but could sometimes take even longer after that depending on various factors as well such as interest rates, fees charged by the lender etc.

Low interest personal loans typically come with 15% fixed interest rates and three-year repayment terms. For example, a 5,00,000 loan at 15% simple interest for 36 months would have a monthly payment of 17,300.

If your credit score is below a 680, you don’t have to worry about securing an unsecured bad credit loan. Some lenders are willing to open their doors to applicants with low credit scores. Speak to a lender representative who may be able to consider other factors such as your monthly income, education or state residency in making their determination of whether they will issue you a lending opportunity.