What is the difference between APR and interest rate?
With regard to consumer finance, the interest rate is the actual cost charged for borrowing money.
The interest rate is relevant to credit cards and is charged on the money that the customer owes at the end of each month if they do not pay back their credit card amount in full.
When it comes to loans, APR is more appropriate, which stands for Annual Percentage Rate.
Calculating the APR is based on the interest rate but also takes into account other factors such as additional fees relating to taking out the loan, as well as the time period and calculates the yearly percentage fee for that loan.
Key Takeaways:
- The interest rate is the percentage of the loan amount that is charged to the borrower for borrowing the money.
- The interest rate is determined by the lender and depends on factors such as credit rating.
- APR takes into account any other fees for taking out the loan in order to create the yearly percentage fee.
- APR on a loan gives a better idea of what you will pay overall and helps when comparing loan options.
Do POS loans have a high APR?
The POS loans on offer at the moment vary greatly in terms and conditions. In general, POS loans provide an alternative to the high APR’s offered by credit cards and personal loans.
Some POS companies don’t charge any interest at all and just charge a one-off fee for the loan, which is either transferred to the retailer or the consumer. POS loans have a fixed term with regular monthly payments, with terms and costs that are very clear from the outset.
