Whether on an ad or in your own research, you’ve probably heard the term “APR,” short for Annual Percentage Rate, but what does it really mean? Let’s take a closer look at this vital aspect of lending so you can know the facts before you borrow.

Every legal document has fine print. Scroll to the bottom and you’ll find paragraph upon paragraph of confusing jargon you usually don’t even need to read. Loan paperwork is no different. Unfortunately, many lenders know this and try to use the fine print as a hiding place for clauses that will give them the legal right to crank up your interest rate, charge you more fees, and add complex conditions to your loan.

Call us crazy, but that’s certainly not what we’re about here at Helix. Our goal is to educate not just our own, but all loan customers, and offer short-term personal loans with clear, simple terms, with no hidden fees, and flexible repayment options that allow you to pay off your loan early without any penalties! In other words, we want to magnify the fine print and put it in concise, everyday language. We want our customers to learn about responsible borrowing practices while they build their credit.

So today we’re talking about APR, a term your should understand before borrowing.

APR stands for Annual Percentage Rate. In the simplest terms, it’s the total amount of money it costs you to borrow a given amount over the course of a year.

You may have heard this term equated with interest rates, but they’re not exactly the same thing in the world of loans. With an APR, interest rate is only one of the factors used to calculate the final number. Every loan carries certain fees, and APR incorporates these, as well.

So if you’re borrowing, it’s important to know the total cost of the loan, not just the principal amount, or the principal plus the interest rate. This can help you factor your loan into your monthly budget, and can even inform your decision of how much to borrow.

Furthermore, and perhaps most importantly, it can help you decide which lender to choose. Some lenders will offer you lower APRs than others, so they’re like signposts pointing to the lowest overall costs. Sort by: Price, lowest to highest. Just remember that the cheapest APR doesn’t always come from the best lender. Some lenders might be more difficult to work with than others, especially if you have little to no credit history.

Now that you know what an APR is, how can you figure out what yours will be? At Helix, we’ll tell you your APR up front, but we’ll also tell you right now how we come up with that number. Once again, we want you to be educated, whether you borrow from us or another lender. We’ve broken down the formula, so get ready for some math.

First, we’ll determine your interest rate. Interest is the amount you pay your lender every month on top of your monthly payment on the principal. It’s a percentage of that principal amount. This is how lenders — well, legitimate lenders — turn a profit.

Your interest rate should be tailored specifically to your financial situation. It depends on several factors, such as age, work status, and credit score. But don’t panic— we understand that folks with no credit history need to borrow money, too. In fact, it’s our goal to help you raise your credit score through the loans we offer.

Unlike some lenders, Helix charges no fees or penalties for paying early. We encourage it. So you can save even more on the loan total.

Fixed APR means the rate does not change throughout the life of the loan. But there are also variable APRs. A variable-rate can fluctuate throughout the life of the loan, based on an outside interest rate. Many variable rate APRs are based on the Wall Street Journal’s Prime Rate. Variable rates can work for or against you. The level of risk and APR you move forward with is certainly up to you, but at Helix, we utilize fixed APRs on our loans.

Here at Helix, we opt for fixed rates. They provide our customers with the clearest, most consistent repayment plan, so there’s no big question about how much the loan will cost at any given time.

Hopefully, this clears up APR for you as you’re researching everything you need to know during your borrowing journey. Remember that the more educated you are as a borrower, the greater your potential for financial success.

Apply for an online personal loan with Helix today. We promise to clearly explain everything about your loan, including APR.