Credit Rating and APR

Question 1

What are the most common forms of personal borrowing?

Answer 1

Bank overdrafts, personal loans, student loans, mortgages, credit cards

Question 2

What is a credit rating?

Answer 2

Measures how risky it might be to allow credit to a specific individual

Question 3

What are the negative effects on a credit rating?

Answer 3

High levels of existing debt, missing or late payments, county court judgements, using payday loans, applying for lots of credit at once, credit cars open but not used, mistake on report, not on electoral roll, moving home a lot, ‘financial association’

Question 4

How do you compare loans with different terms and conditions?

Answer 4

APR is supposed to help by taking into account the interest charged and any unavoidable costs

Question 5

What does APR take into account?

Answer 5

The size, number and frequency of payments, any other unavoidable charges, accounts for different compounding interests

Question 6

What is personal APR?

Answer 6

The rate you actually get

Question 7

What is representative APR?

Answer 7

Advertised rate that at least 51% of people accepted for the loan are expected to pay

Question 8

What is annual percentage rate of charge (APRC)?

Answer 8

Term now used for mortgages, personal and advertised APRC are the same, doesn’t reflect credit score and status