What is the APRC and the total cost of credit

In addition to information about the interest rate and loan installments, the APRC also appears in advertisements of financial institutions. What does this mysterious abbreviation mean? What impact does the APRC have on the final loan amount? Does a lower APRC mean a cheaper loan? We’ve provided answers to these and other questions in the following text.

What is the APRC?

What is the APRC?

APRC is nothing but Real Annual Interest Rate, which means the total amount of costs we have to incur on a yearly basis when borrowing. Very often it is confused with RSO, i.e. the Annual Interest Rate, informing only about the amount of interest.

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What does the APRC consist of?

What does the APRC consist of?

APRC includes costs such as interest on the loan, its insurance and commission for the institution granting the loan. In addition, it includes fees for additional services, including preparation costs, consideration of the application or visit of the adviser at home. An extremely important component that borrowers forget is also the value of money when paying back the loan, as well as the repayment period itself.

Is a lower APRC a lower cost of credit?

Is a lower APRC a lower cost of credit?

It is widely believed that a low APRC means a cheaper loan. Nothing could be more wrong. Much depends on its components, among others the amount of the loan, the form of repayment of installments and the period for which the loan was taken.

It should be remembered that the shorter the repayment period, the higher the APRC ratio is. How it’s possible? Already after the first billing period, usually after a month, we pay the interest of the loan granting institution together with the installment, so we pay the debt. Theoretically, the loan amount we own is decreasing. Therefore, a high APRC ratio does not necessarily mean a higher cost of credit.

The form of repayment of loan installments is also significant. When choosing between fixed and decreasing installments, we should not be guided by the APRC, which will not necessarily indicate the cheapest option. Why is this happening?

Each installment includes interest and the amount of capital borrowed. Equal installments are calculated by dividing the total loan amount by the number of months. It remains at a similar level throughout the repayment period. Initially, the borrower repays mainly interest, and only slightly borrowed capital. However, in the case of decreasing installments, each month we repay a certain part of the capital and interest on the remaining amount. Throughout the repayment period, the amount of capital borrowed is constant, but interest decreases.

The above examples show that instead of checking the APRC, we should consider the final cost of the loan.

How to calculate the APRC?

How to calculate the APRC?

We already know what RSSO is, what elements it consists of and how it affects the final repayment amount. But how do you calculate how the Actual Annual Interest Rate? The matter is not simple, and the formula for calculating the APRC resembles the task at the extended matriculation math. Fortunately, we do not have to have above-average knowledge to be able to check what costs we are dealing with.

The network includes APRCs calculators, as well as loan comparison tools, thanks to which we can calculate the value of the Real Annual Interest Rate. However, using them may pose some problems, especially if we have to provide costs we are not sure of, such as the amount of insurance.

Therefore, the best solution is to get information from the lending company. Her representative is required to simulate and provide us with the final loan amount.

By taking a short-term loan online , thanks to the easy-to-use calculator, you can easily calculate the total cost of debt repayment yourself.

An attractive alternative to bank loans are the so-called chwilówki. We should remember that companies from the non-banking sector are also subject to the rules set out in the Consumer Credit Act, which is why we are sure that the cost of the loan will not exceed the maximum costs set by the Legislator.

What to consider when comparing payday loans?

What to consider when comparing payday loans?

Rapid online loans have gained many supporters in recent years. Increasing demand has resulted in many companies offering easy access to cash. How to find the best one in the thicket of offers? Which loan will be the cheapest? And finally, what criteria to consider when comparing payday loans?

The abovementioned APRC is an extremely important issue. Also note that there are no hidden fees in the contract. Remember to always check the total cost of the loan.

The repayment flexibility is also important. It may turn out that we will not be able to repay the debt within the prescribed period. Let’s make sure that the company providing online payday loans allows its extension. On the other hand, let’s also find out if there is a possibility of early repayment.

The company’s credibility is also extremely important. It is worth checking if it is entered in the register of the Polish Financial Supervision Authority or if it belongs to industry associations, among others Polish Association of Loan Institutions. Users’ opinions may also be helpful. Before we decide to take a payday loan online, let’s read what the current customers have about the company.

Summary

Regardless of whether we need more cash or a small amount for unexpected expenses, payday loans are a very good way to maintain financial liquidity. Knowing what to look for, as well as carefully reading contracts, we do not have to be afraid of any irregularities deciding to contract it.

A short-term loan is a quick cash injection with no hidden fees. You can easily check the total cost of the loan on the company’s website, entering the loan amount and repayment date you have chosen on the calculator, as well as in the information form and loan agreement.

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