A loan advertisement may promote a low interest rate or small monthly payment. However, the annual percentage rate—APR—can provide a better view of the borrowing cost.APR generally combines the interest rate with certain finance charges. This makes it useful when comparing similar offers from different lenders.
Do not confuse APR with the interest rate. Two loans may advertise the same rate but carry different fees, creating different APRs and total costs.Review the loan amount, APR, monthly payment, repayment period and total amount paid. A longer term may reduce the monthly payment while increasing the total interest.
Check for origination, documentation, late-payment and prepayment fees. Ask whether optional insurance or add-on products have been included in the amount financed.Compare offers using the same loan amount and repayment term. Otherwise, the comparison may not be meaningful.
Before signing, calculate whether the payment fits your budget after housing, food, transportation, insurance and savings. Approval does not automatically mean affordability.Be suspicious when a lender avoids discussing the APR, guarantees approval or demands an upfront payment through gift cards, cryptocurrency or wire transfer.
