Loans Are Lenders Cheating On Aprs

Loans Are Lenders Cheating On Aprs

Loans Are Lenders Cheating on​ APR’s?
A pound from one lender is​ as​ good as​ a​ pound from another .​
So when you're shopping for a​ loan,​ the​ key issue becomes the​ interest rate .​
Consequently,​ when you​ read press advertisements and visit web sites,​ the​ Annual Percentage Rate of​ interest (APR) highly influences which lenders or​ loan brokers you​ apply to​ .​
After all,​ the​ government introduced APR's as​ a​ standard calculation that every lender has to​ use,​ precisely to​ help the​ public make reliable comparisons .​
But who's checking that the​ APR's are calculated correctly? Could some be cheating by promoting a​ lower APR than the​ rate they're entitled to? the​ commercial success of​ a​ promotion can be hugely improved by a​ really low APR .​
We think some must be tempted,​ don't you?
In a​ survey 92% of​ all loan advertisements checked quoted an​ APR Typical .​
(You'll find below,​ a​ detailed explanation of​ what APR actually means including its variants) .​
The APR Typical means that at​ least 66% of​ applicants approved for a​ loan are offered that APR rate or​ cheaper .​
No one included in​ that two thirds will have been offered a​ higher rate than the​ stated APR Typical .​
The problem is​ that no independent body is​ checking these figures .​
So the​ system is​ open for cheating .​
The Office of​ Fair Trading (OFT) regulates the​ selling of​ Personal loans but even they admit that their resources are over stretched and they only check on​ a​ reactive basis .​
We think that's administrative speak for hardly ever!
The influential trade magazine Moneyfacts,​ has twice raised the​ same concerns with the​ OFT asking them what checks are carried out on​ the​ APR's quoted by lenders .​
After all lenders can get to​ the​ top of​ that magazine's Best-Buy Tables with a​ low APR and win significant amounts of​ business as​ a​ result .​
The OFT clearly needs to​ do more .​
Understanding APR's
APR is​ short for Annual Percentage Rate .​
It illustrates the​ true cost of​ the​ money borrowed on​ loans,​ mortgages,​ and credit cards .​
And by law,​ consumers must be provided with that information .​
The APR calculation takes into account the​ basic interest rate,​ any initial fees,​ when interest is​ charged (i.e .​
daily,​ weekly,​ monthly or​ annually) and any other costs you​ have to​ pay .​
As all lenders are legally required to​ calculate APR the​ same way,​ it​ should enable consumers to​ make meaningful cost comparisons between lending products .​
So if​ one finance company is​ offering you​ a​ loan at​ 5.6% plus an​ application fee of​ £100 and another is​ offering you​ an​ interest rate of​ 5.8% with no fees,​ then a​ comparison of​ the​ APR figures will prove which of​ the​ loans is​ cheapest .​
APR Variable
When you​ see APR with the​ word Variable written after it,​ this means that the​ interest rate can vary whilst you​ are repaying the​ loan – the​ interest rate is​ not fixed .​
APR Variable Typical
This variant is​ used in​ 92% of​ all loan advertisements .​
It means that the​ advertiser can't be specific about the​ interest rate applicants will be offered as​ their rates vary,​ usually in​ response to​ the​ applicant's personal credit ratings and the​ amount of​ money they want to​ borrow .​
Therefore,​ APR Variable Typical is​ used to​ give the​ public a​ general impression of​ the​ interest rates currently on​ offer from that lender .​
The addition of​ the​ word Typical means that at​ least 66% of​ applicants approved for a​ loan are offered that rate or​ cheaper .​
Then when a​ loan offer is​ confirmed,​ the​ paperwork will reveal the​ actual APR or​ APR Variable actually being offered .​
Don't forget that the​ word Variable within the​ description also means that the​ interest rate isn't fixed and may vary from time to​ time,​ go up or​ down .​
APR Typical
This is​ the​ same as​ APR Variable Typical except that the​ interest rate is​ not variable - it​ is​ fixed for the​ duration of​ the​ loan.

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