Looking for a loan? Check the cost of credit before you borrow with our Money Tools
October 19, 2022
Whether you are taking out a loan for a car, holiday or home improvements, you should always consider the cost of credit when choosing the best loan amount, length of the loan and financial provider for you.
To help you do that, use our Money Tools which are free to use, and give you an easy way to compare your options.
So, what is the cost of credit and how do I work it out? Here’s everything you need to know.
What is the cost of credit?
When you take out a loan, the cost of credit is the amount you pay in addition to the amount you have borrowed. The cost of credit on loans is set out as the Annual Percentage Rate (APR). Our Money Tools will allow you to identify the cost of credit by looking at the APR and comparing loans offered by financial institutions.
When comparing loans, you may notice that as the amount borrowed increases the APR may decrease. This can make it appear that it is cheaper to borrow more. However, the more money you borrow, and the longer you borrow for, the more APR you will pay overall – even if the APR rate is lower. Let’s look at some examples:
|Amount borrowed||APR||Term||Cost of credit|
Let our Money Tools do the work for you
The Tools help you compare the costs and benefits of products from the main financial providers. Before applying for your loan, use our personal loan Money Tool to compare the cost of credit across different providers to see which one is cheapest.
When should I use Money Tools?
But it’s also worth bearing in mind that no two current accounts, loans or mortgages are the same. Switching financial providers for your existing financial products can be a great cost cutting measure. Our Money Tools can show you if you’ll save money by switching to a new provider, or if the best deal available is your current one.Return to News