When searching for a suitable loan your main focus should be that the loan is not a repayment burden on your limited financial resources. In order to ensure it you usually look for a cheap interest rate. But that is not enough. You must locate cheap APR loans that ensure actual low amount for monthly payment towards the loan installments and makes life easy for you.
There is a wide difference between simple interest rate and Annual Percentage Rate and the different should be kept always in mind while searching for a suitable loan for your circumstances. A simple interest rate does not include extra payments that the lender wants you to make in borrowing money.
So your monthly payments towards the loan installments are not truly represented in interest rate only. That is why there is a need to know your APR on the loan. APR includes not only interest rate but also various expenditures the borrower is supposed to make in taking a loan. APR includes loan processing fee, underwriting fee, document preparation fee, private mortgage insurance, points, pre-paid interest, loan application fee and credit life insurance.
But lenders calculate APR differently which means that it would be difficult to get . However, one way to ensure cheap APR is that you ask the lenders to show his costs for the same interest rate and for the same duration. There are fees like homeowners insurance, title fees, escrow fees, attorney fees which should be deleted from the loan. You should then add the loan fees to the loan. Usually a lender charging lower loan fee is having a cheaper APR loan. Also note that you should never attempt to compare loans with different repayment duration using respective APRs. It may be that a short term loan of 15 years is of higher APR as the loan fees are to be paid in a shorter time period. You should be very careful in calculating APR in order to find a cheap APR loan.
