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Disclaimer: * The APR value derived from this calculator may vary basis any additional charges added in the loan amount such as third party products.
** The Stamp duty charges and Document charges may vary for each case
What Do You Mean by Annual Percentage Rate (APR)?
While an APR or Annual Percentage Rate is a commonly used term within the lending industry, several first-time loan applicants don’t know about it. If you are planning to apply for a Two-Wheeler loan, here’s a guide to understanding the meaning and relevance of an APR.
What is an APR for Two-Wheeler loans?
When you opt for Two-Wheeler finance, you will come across two terms –
- Interest rate
- Annual Percentage Rate (APR)
The nominal interest rate is the interest amount your lender charges on the total amount you have borrowed, also known as the principal. This figure does not include expenses like processing fee, penalties, pre-closure charges (if any), which are all charged at a certain loan percentage.
In contrast, the APR amount includes the nominal interest rate, penalty, processing fee, pre-closure fee, and other applicable charges. Simply put, an Annual Percentage Rate is a combination of all payments you will make against your loan.
A lending institution will denote your APR in percentage form. This percentage depicts the actual cost of the loan as actual percentage rate during one year. You will pay this amount annually to your lender once they approve your loan.
How to calculate APR?
You can use an APR calculator online. It will instantly tell you how much you will pay against your loan in a particular year. Here is how it works:
- Open an APR calculator on your laptop or smartphone.
- You will see various columns asking for your total loan amount, interest rate, processing fee, etc. Fill in all the necessary details.
- After inputting relevant data, click on “calculate”, and you’re done.
Why is it critical to consider APRs before opting for Two-Wheeler Finance?
When you go shopping for any product or service, you need to know its actual cost. The same logic applies when you are looking for Two-wheeler finance. Your loan’s EMIs are not the only money you pay to a lending institution when repaying a loan. This is what makes the APR percentage important as it gives you the true and total cost of what your loan costs within a year.
Varied lenders have different formulas to calculate the APR, which can lead to a difference in the final amount. Therefore, it pays to opt for a lending institution offering a competitive APR percentage.
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