APRC – what is this? What does it mean for credit?
Many of us wonder what an APRC is, especially when watching TV commercials and online companies that offer payday loans. APRC presentation in both credit and non-bank agreements, as well as offers, is obligatory. Despite this, few potential borrowers attach importance to the final value of the APRC.
When choosing a cash loan, which is a short or long-term financial commitment paid in cash or by bank transfer. First, customers want to know the total financial commitment to the bank. In this case, he should also pay more attention to the APRC.
This measure includes not only the interest rate on the loan but also other fees – including a commission for its granting and consideration of the loan application, insurance or costs of additional services. It also takes into account the time value of money and the repayment period – these factors can have a significant impact on the amount of the actual annual interest rate.
What does APRC mean?
APRC is an abbreviation of the phrase Real Annual Interest Rate of our credit or loan. This abbreviation means the total cost of the loan that each borrower must bear. This is the cost factor for calculating the loan cost. Borrowing does not stop and is not limited to the bank paying a certain amount. In fact, the loan repaid later is slightly different from the starting amount.
Additional costs that we must incur in connection with a given loan are:
- loan interest rate;
- commission for granting a loan;
- fees for additional services (e.g. a consultant’s visit at home);
- fee for considering the loan application;
- value of money over time and the repayment period.
In addition, the actual annual interest rate is related to the value of money. If the value of money changes during the repayment period, the APRC also changes.
How to count the APRC?
The APRC calculation is not an easy statement, especially for people who do not have experience and professional preparation. There is a special formula for the APRC, but it is quite complicated, so you should ask the lender to calculate the APRC and its amount.
On the Internet, you can also use APRC calculators and even credit comparers, which, according to our criteria, will find an offer that matches our needs and indicate its real costs.
The APRC abbreviation may differ significantly from the most frequently highlighted interest rate on the loan. Includes all additional costs associated with providing the funding. The APRC consists of:
- Nominal interest rate – usually on an annual basis;
- Commission for the bank;
- Credit insurance;
- The cost of property valuation and preparation of the so-called appraisal report – this is only for a mortgage or mortgage loan.
Only all these components combined tell us about the real cost of credit or loan.