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    called risk based pricing. This effectively means that they look at each individual applicant and assess their own personal circumstances and credit history before deciding what interest rate to offer them
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    What does ‘Typical’ APR mean and does it help consumers?

    Nowadays it is very rare to see an advertisement for a loan without seeing a ‘typical’ APR. Some people know what APR stands (although alarmingly many do not – if you are one of them it stands for Annual Percentage Rate and is meant to reflect the cost of the loan in interest terms) but very few properly understand what the ‘typical’ bit means, where it comes from and more importantly whether it helps them as consumers.

    Firstly let me explain what is actually means. Wherever you see the word typical next to an APR it means that the provider has to give that rate to at least 66% of the people that apply for the product. It sounds simple and straightforward but in reality isn’t for a number of reasons.

    It is used by lenders who employ a system called risk based pricing. This effectively means that they look at each individual applicant and assess their own personal circumstances and credit history before deciding what interest rate to offer them.

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    ly many do not – if you are one of them it stands for Annual Percentage Rate and is meant to reflect the cost of the loan in interest terms) but very few properly understand what the ‘typical’ bit means, where it comes from and more importantly whether it helps them as consumers.

    Firstly let me explain what is actually means. Wherever you see the word typical next to an APR it means that the provider has to give that rate to at least 66% of the people that apply for the product. It sounds simple and straightforward but in reality isn’t for a number of reasons.

    It is used by lenders who employ a system called risk based pricing. This effectively means that they look at each individual applicant and assess their own personal circumstances and credit history before deciding what interest rate to offer them

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    re it comes from and more importantly whether it helps them as consumers.

    Firstly let me explain what is actually means. Wherever you see the word typical next to an APR it means that the provider has to give that rate to at least 66% of the people that apply for the product. It sounds simple and straightforward but in reality isn’t for a number of reasons.

    It is used by lenders who employ a system called risk based pricing. This effectively means that they look at each individual applicant and assess their own personal circumstances and credit history before deciding what interest rate to offer them

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    to give that rate to at least 66% of the people that apply for the product. It sounds simple and straightforward but in reality isn’t for a number of reasons.

    It is used by lenders who employ a system called risk based pricing. This effectively means that they look at each individual applicant and assess their own personal circumstances and credit history before deciding what interest rate to offer them

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    called risk based pricing. This effectively means that they look at each individual applicant and assess their own personal circumstances and credit history before deciding what interest rate to offer them. If they think you represent a good risk they will offer you a good rate, if they think you are a bad risk you will probably get offered a higher rate, if you are offered a loan at all!

    This means that without something like the typical rate APR they would not be able to advertise any rates, and you would not know which company to approach, so in that sense it has to be a good thing.

    However apart from the obvious flaw of not knowing what rate you will get until you apply, there is another more serious flaw. Before deciding what rate to offer you they will undertake a credit check, which you would reasonably expect them to do if they are to assess you as an individual. The problem is that doing this leaves what is known as a credit footprint on your record and other lenders will be able to see that some

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