28 Dec, 2020
We have often heard the term ‘annual interest rate’ when we were having Mathematics lessons, but most of us would be afraid when hearing the term and understand what it is.
All personal loan companies would emphasize how low their annual interest rate of loan products can be either on advertisements or websites. Even if you did not have loan needs and just needed a credit card, many credit card companies or banks will also state their annual interest rate, in which some of them will even state their APR. What are the differences of annual interest rate and APR? You are advised to know the calculation method of APR if you are going to apply for personal loans or credit cards.
What is APR?
What is APR? APR stands for ‘annual percentage rate’, which is shown when you are applying for personal loans, mortgages or credit cards. Other fees, including handling fee, are also included when calculating APR, which is why it is used for calculating the actual interest the customers need to pay in a more accurate way. If you are sure about the amount of other fee you need to pay, you can only check the annual interest rate: the lower APR is, the less interest you need to pay. The calculation of APR varies among personal loan companies, which is why you are advised to compare the calculation of APR of different loan companies before applying for personal loan or credit cards.
How can I calculate the APR?
As mentioned above, APR is dependable on other fees, including loan handling fee, service charges and loan promotional gifts, as well. You can check the basic formula for calculating APR below.
Monthly flat rate X 12 months X 1.9
Noted that you cannot simply change the time period from 12 months to desired loan instalments, as the rate may deviate.
Will that be any fluctuations in APR?
Yes. A lot of banks or personal loan companies would launch loan promotions for new customers for attracting customers. For example, the interest is waived or the interest rate is lower for the first few months after drawing down the loan. However, the calculation of APR is changed to the one stated on the loan agreement after promotion ends, which is why you also need to pay attention to the overdue interest based on the stated APR. Regardless of personal loans, credit card repayments and mortgages, you may need to bear overdue interest rate of at least 29% for overdue repayments.
What are the factors of calculating APR?
In Hong Kong, most of banks or personal loan companies depend on TransUnion Credit Report, which can better reflect credibility of customers through their current loan status and loan repayment records, when assessing applications of personal loan or credit cards: the higher the score is, the lower the APR is. Apart from that, other non-credit related documents will also be recorded, such as criminal conviction data. For more information, you can check What is TU?
Actually, TransUnion Report is not the only factor when determining APR. Some of the loan companies, including Cashing Pro, will determine APR and loan amount based on customers’ monthly income, bank transaction records (i.e. payroll records) and available documents. Apply Cashing Pro’s Personal Loan Now!
Because of this, you can enjoy the lowest APR the banks or personal loan companies can provide as long as you can maintain good credit records on TransUnion Credit Report.
Warning: You have to repay your loans. Don’t pay any intermediaries.