How to Calculate and Compare Loan APRs

On taking of any loan, the borrowers pay the interest rates and other fees. The overall charges make up the cost of the loan. Annual Percentage Rates include all of these charges including the interest rate per month. The lenders offer the loans but you have to calculate and compare their rates. In this blog, we will elaborate on How to Calculate and Compare Loan APRs.

Almost every lender provides their service of online calculators on their official websites. You will only need to add some details of debt on the calculator. And, then, you will know about it. Emirates Loan also helps every individual in calculating of annual rates of their debts. Make sure that the debt’s cost will never hurt your budget.

How to use an APR calculator?

Without utilizing of calculator, no one can calculate the rates. But for the use of it, the essential factors that determine the APR are interest amount, and other charges, etc. You will enable to compare the APRs after calculating. The following are the elements of APRs calculation:

Debt amount: 

For planning the taking of debt, you should have a complete idea of how much finance you will need to borrow.    

Charges: 

Numerous lenders give the debts with the additional charges of processing fees. Always choose a lender that provides the borrowed amount with lower charges. Other fees may include late payment, loan default, etc. All of these fees will add to the annual rates.  

Interest rates: 

Interest rates will charge on every debt. In APRs, the monthly installment includes the rates of annual interest amount.      

Terms: 

The terms depend on the loan amount. Most of the loans come with the tenure of two to five years in the UAE. The paying of monthly installments constantly in all over tenure is essential. So, there is no chance of penalty charges for late payments.    

Are APRs different from interest rates?

The APRs are different from the interest rates. Both rates have their specific terms. But, it also depends on the products of loans that are offered by the lenders.   

If you choose an installment loan like personal, car, etc, there are no extra financial charges. That’s why the rates of APR & interest are the same. On the other hand, if the loan is with origination fees, the APRs are high as compared to interest rates. In the case of short debt terms, there is a lot of difference between APRs & interest rates.   

How are APRs calculated for a loan?

The major factors in the calculation of APR are interest rates and numerous other financial charges. The cost of monthly installments every year makes the Annual Percentage Rates. This rate will show in percentage. It is not specifically decided on the base of interest rates. This step is a part of the measurement to know the debt’s cost for the whole tenure.        

The APRs will only change when you choose an interest rate of an adjustable kind. One of the reasons for increasing the amount of this rate is due to paying the amount earlier than the loan’s terms end.     

Compare Loans APRs  

When you apply for a loan, it is essential to know about its APR. The APRs of all loans from all lenders are different. The comparison between the loans is important to choose the right one. For this comparison, one of the important factors that you have to compare is APRs. Many borrowers do not know how to compare APRs.

For taking accurate information, you can take suggestions from Emirates Loan’s professionals. During working hours, the company provides customer services at all times. So, they make sure their clients will always get satisfaction from getting loan services with a lower APR. The easier way to compare the APRs is to check their type. The common types include fixed and variable:     

Fixed type   

The fixed APR means that the amount will never change in the whole duration of repayments. Just like a fixed interest rate, the amount of APR remains constant. Before signing the loan’s commitment papers, read out the term of this rate. In rare cases, this rate will change if the issue will delay or miss payment.      

Variable type  

The variable type depends on the financial market of the United Arab Emirates. The APR rates increase or decrease accordingly financial situation of the market. It is also a reason for high or low monthly payments. This rate also depends on the interest amount.

So, when you know about the Annual Percentage Rate of a particular loan, it is good to choose one. Therefore, you will easily pay down the debt within your budget of finances.       

The bottom line:   

It is crucial to do the process of calculation of APRs to easily compare between different lenders. You can easily calculate with the use of the APR calculator. The best way to apply is with a good credit score. It helps in the finalizing of the lower amount of this rate. As a result, the overall debt cost also becomes lower for the borrowers. If your credit score is not good, you have to improve it before applying. Consequently, the loan will with better terms.