The interest rate is the per annum rate at which interest is calculated on your loan, while APR is a legally mandated rate that describes the total cost of borrowing. Read on for more detail.
Interest Rate = Fixed Margin + LIBOR (variable)
We offer loans with a simple interest rate, which means that interest does not compound throughout the life of the loan. The rate you are charged is made up of two components: a fixed margin and 3-month LIBOR. The fixed margin is a simple percentage between 5.0% and 8.0%. The 3-month LIBOR is a floating rate that will change throughout the life of your loan.
Variable Interest Rate
- What are they? Variable interest rates fluctuate alongside the market rather than remaining fixed throughout your loan tenure.
- Why is it important? When working with variable interest rates, your minimum monthly due will change according to the changes in interest rates.
- What’s normal? Variable interest rates are the norm for private education loans; these include MCLR, Prime, and LIBOR. The latter is a transparent, independently-set rate aligned with current market trades.
Annual Percentage Rate (APR)
APR = Interest Rate + fees + cost of borrowing
- What is it? Annual percentage rate, or APR, explains the annual cost of borrowing. It is expressed as a percentage and it includes your interest rate plus all the fees and costs associated with your loan. That means it’s always higher than your interest rate. It is not the monthly rate at which interest accrues on your loan. It is a tool that you can use to compare our loan offers with those of other lenders and is useful for helping you make an informed decision about which loan offer to choose.
- Why is it important? APR is used instead of interest rates as it shows you the effect of fees on the cost of your loan, as well as your interest rate. It’s far more accurate than interest rates alone.
- What’s normal? This varies from place to place. Lenders in countries like the US and UK are required by law to provide APR to their customers to avoid hidden fees.