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Understanding “APR” Can Help Underbanked Avoid Bad Loans
AFSAEF Releases Third Brochure in Personal Loans 101 Financial Literacy Initiative

WASHINGTON, November 1, 2012….Building on previous brochures to educate underbanked borrowers about making wise personal loan choices, the latest American Financial Services Association Education Foundation (AFSAEF) brochure focuses on explaining the purpose of Annual Percentage Rate (APR) and how it is only one factor that consumers should consider when seeking a loan.
 
Understanding APR explains how the annual percentage rate, or APR, can be misleading and confusing if viewed alone or used to compare different types of loans with different terms and fees. The brochure educates borrowers on the importance of evaluating the amount financed, finance charge, total amount of money repaid over the loan period, and the APR. Only by considering these factors together can borrowers obtain an accurate picture of a loan’s cost.
 
“It is important for consumers to consider and evaluate all terms when deciding which loan is best for them,” said Susie Irvine, AFSAEF president and CEO. Borrowers always should ask ‘is this loan affordable and can I fit the payment amount into my monthly budget?’”
 
Understanding APR contains a monthly spending worksheet for potential borrowers to use in calculating whether or not they can afford the payments on a loan and a worksheet for comparing different loans. It also advises borrowers to shop around for the best loan terms, ensure they fully understand the terms of a loan and not to take a loan if they feel pressured to do so.
 
“As with the first two brochures in our Personal Loans 101 series, Understanding APR gives potential borrowers detailed information about small-dollar loans,” Irvine said. “The purpose of Personal Loans 101 is to educate individuals and families about protecting themselves from the consequences of bad loan decisions.”
 
Understanding APR follows Understanding Personal Loans and Understanding Credit Risk in the Personal Loans 101 series. Individually and collectively, the brochures explain the advantages of traditional installment loans that are fully amortized, underwritten and repaid in regular installments made up of both principal and interest.
 
Personal Loans 101 materials are available online and on Facebook. You can also follow Personal Loans 101 on Twitter. Printed versions of the brochures are available from the American Financial Services Association Education Foundation, 919 18th Street, NW, Suite 300, Washington, D.C., 20006, 888-400-7577, personalloans101@afsaef.org.
 
Contacts:
Karen Klugh, 202-776-7308, kklugh@afsamail.org
Kristen Potter, 904-755-9722


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