APR, AER and EAR What's do they mean? Page 2

Then there's yet another variant - X% APR Typical variable.

Unsecured Personal Loans. When you are your guarantor and not your home: Interested in an unsecured loan? This article is good background reading
Consolidation Loans for Tenants. Empowering Tenants with a Method to Counter Debts: Tenants will find it harder to raise a loan but its not impossible. This article explains
How Your Credit Rating is Determined: Your credit rating is important. This article explains how credit ratings work, their effects and what to do if the score is based on incorrect information.
Adverse Credit. When is a credit history described as adverse ?: When do have an adverse credit rating? The situation is far from clear but this article sheds light.
Car Loans Drive down the cost: Usually the cheapest way to finance the purchase of your car is usually with a personal loan. But there are other methods. This article explains.
IS YOUR LOAN COMPANY RIPPING YOU OFF?: Despite what they might profess, money lenders with sky high interest rates are preying on the people who are in the worst position of anyone else to pay the cash back. But no more, says the Competition Commission, which is standing up to these ‘Loan Sharks' and taking a stand.

You'll almost always see this expression in advertisements for loans. This means that the lender cannot be totally specific about the interest rate they will offer you as the rates they charge varies, ( insurance ) normally in response to the amount of money you want to borrow and your personal credit rating. So the calculation for X% APR Typical variable is used to give you an idea of what interest rate you can expect. The addition of the word "Typical" means that at least 66% of their approved applications are offered that rate or cheaper .

Now lets look at EAR. EAR stands for "equivalent annual rate". It's used to ( remortgages ) show the cost of overdrafts and any type of account that can be in credit and also go overdrawn. The calculation shows you the true cost if you use the overdraft facility. Like the APR calculation, EAR takes into account the interest rate and when the interest is charged to the account plus any additional charges. So in most respects APR and EAR achieve the same thing - it's just that APR's apply to a product that is entirely a borrowing facility whereas EAR applies to a product, such as a bank current account, that can be in credit or overdrawn.

By the way, both the calculations for APR and EAR exclude any Payment ( cheap car insurance ) Protection Insurance you've decided to buy to run alongside your borrowing facility. That's because this insurance is always optional and not a cost built in to the lending.

AER is quite different. It's only used in relation to savings and investments. It's all about the rate of return you will receive. AER is short for "annual equivalent rate". It shows ( home insurance ) the true rate of interest you will have received by the end of the year. It takes into account the regularity of which interest is added to the account as this has a compounding affect upon the interest you receive. The calculation also strips out the affect of any introductory bonuses that disappear after a few months - a popular trick used by institutions to boost their products to the top of the Best Buy tables. AER is a most useful tool.

It's not easy to remember all this but we hope that the mists of ( cheap loans ) misunderstanding have been removed!

Your home may be repossessed if you do not keep up your repayments on a mortgage or any debt secured on it.
Loans may be secured on your home or other property. Think carefully before securing other debts against your home.