APR stands for Annual Percentage Rate. It shows the yearly cost of borrowing as a percentage and can help you compare different credit products.
APR takes account of the interest you will pay and certain fees or charges linked to the credit. This can give you a clearer picture of the cost than looking at the interest rate alone. MoneyHelper also explains how APR can help when comparing credit.
What does Representative APR mean?
A Representative APR is the rate a lender uses when advertising credit.
It is based on the agreements we reasonably expect people to enter into as a result of the promotion. At least 51% of those agreements are expected to have this APR or a lower APR.
It may not be the rate you are offered. Your rate will depend on your circumstances.
The Financial Conduct Authority sets the rules for Representative APR.
Is APR the same as the interest rate?
No. A fixed interest rate is charged on the full amount you borrow for each year of the agreement.
The APR works in a different way. It takes account of when you make each payment. It also includes the fees and charges you must pay.
This is why the APR can be higher than the annual interest rate shown in a finance example.
How is our APR calculated?
APR is calculated using the cost of the credit over the agreement. This includes the interest charged and any charges that must be included in the APR calculation.
For Go Car Credit Hire Purchase agreements, important parts of the calculation include:
- Interest rate: Our interest rate is fixed. This means it will not change during the agreed term.
- Length of the agreement: We offer car finance over 24 to 60 months.
- Charges: Charges that form part of the cost of the credit can affect the APR. Our representative example includes a £295 admin fee and a £10 option to purchase fee.
The FCA sets out which charges form part of the total cost of consumer credit.
What does a Representative Example look like?
Here is our example for Hire Purchase car finance.
Go Car Credit is a direct lender. We offer car finance for people with bad credit.
Some benefits may count as income. We may also be able to help if you are self-employed.
We look at each application on its own. Any offer is subject to status and affordability.
Representative example – Total amount of credit £10,500, annual interest rate 18.25% (fixed), charge for credit £9,886.25 (£9,581.25 interest, £295 admin fee and £10 option to purchase fee), total amount payable £20,386.25. Loan term of 60 monthly instalments, 59 payments of £339.60 and 1 final instalment of £349.60. 34.5% Representative APR – Subject to status and affordability.
Why is APR important?
APR gives you a standard way to compare the cost of different credit products. It can help you see whether one finance agreement may cost more than another.
When comparing finance, it is also important to look at the monthly payment, the length of the agreement and the total amount payable. A lower monthly payment does not always mean a lower overall cost.
MoneyHelper provides more information about APR and the cost of borrowing.
Go Car Credit is a direct car finance lender. This means we make the lending decision and provide the finance if your application is approved.
What can affect the APR you are offered?
The APR you get can depend on the lender, the type of finance and your circumstances.
A lender may check your credit file when you apply. This can show the credit you already have and how you have made repayments.
Missed payments, defaults or other credit problems may affect the rate you are offered. They do not always mean you cannot get car finance.
Different lenders use credit information in different ways. Your credit profile can show the information held about your credit history.
APR and bad credit
If you have a less than perfect credit score, some lenders may offer you a higher APR. Some may not be able to offer you finance.
Lenders may look at your credit history when they decide whether to lend to you and what rate to offer.
Your credit score is only one part of your credit profile. A good credit score does not guarantee that you will be accepted for car finance.
Go Car Credit is a direct specialist lender. We consider applications from people who may have found it hard to get car finance elsewhere.
We look at more than your credit score. This includes your income, current credit commitments and credit history.
We also check whether the car finance may be affordable for you.
We assess each application on its own. Your first car finance decision is only one stage of the process.
Does applying affect your credit file?
When you apply with Go Car Credit and meet our minimum criteria, we start with a quotation search. This is a type of soft credit check and does not negatively affect your credit report.
We may complete another quotation search if new address information is added during your application.
A hard search is completed after the agreement has been signed and the finance is confirmed as ready to pay. This leaves a record on your credit report.
A soft search does not mean that your application has been approved. We still need to complete our lending checks before finance can be offered.
The difference between hard and soft credit searches is mainly about how the search appears on your credit report and whether it can be seen by other lenders.
How can I compare car finance APRs?
APR is useful when comparing finance, but it should not be the only figure you look at.
Before choosing an agreement, check:
- the APR;
- the annual interest rate;
- the monthly payment;
- the number of monthly payments;
- any fees or charges; and
- the total amount you will repay.
A car finance calculator can help you compare example monthly payments at different APRs and agreement terms.
Understanding how car finance works can also make it easier to compare the interest rate, APR, monthly payments and total amount payable.
Why choose Go Car Credit?
Go Car Credit is a direct specialist lender of Hire Purchase car finance. If you apply with us, we make the lending decision and provide the finance if you are approved.
- Authorised and regulated: Go Car Credit Limited is authorised and regulated by the Financial Conduct Authority. Our Firm Reference Number is 727117.
- Direct lender: As a direct lender, you apply straight to us rather than through a credit broker.
- Soft search first: If you meet our minimum criteria, we start with a soft quotation search.
- Individual checks: We look at each application on its own. We do not make a decision using only your credit score.
- Clear information: We explain the finance and payments before you decide if you want to go ahead.
- Customer reviews: Our customers can share their experience on Trustpilot.
The car finance approval process has a few steps before the finance is ready to pay.
How to apply for bad credit car finance
You can apply for car finance online by giving us some details about yourself and your income.
If you meet our minimum criteria, we start with a soft quotation search. We then review your application.
A soft search does not mean you are approved.
If we can offer you finance and you want to go ahead, the car finance approval process has more checks before the finance is ready to pay.
There is no charge to apply. You do not have to continue if the finance is not right for you.
All finance is subject to status and affordability.
