When it comes to taking out a personal loan, it’s important to understand interest rates and how they affect the total amount you will pay for the entire loan. You may have seen terms like Annual Interest Rates (AIR) or Annual Percentage Rate (APR) and wondered what these mean.
In this post, we’ll explain exactly what “apr rate” means, how it differs from the simple interest rate, and why the length of your loan term matters just as much as the percentage rate. We’ll also break down every fee you’ll encounter at Loansmart—so you’ll know exactly what each cost covers and how it affects your total repayment. Ready to see what your loan really costs?
Let’s dive in.😀
Understanding APR and AIR
What is the Annual Interest Rate (AIR)?
The AIR (Annual Interest Rate) is the percentage rate charged by the lender each year on the outstanding loan balance. It’s the “headline” rate you see advertised—Loansmart’s AIR ranges from 9.95% p.a. to 35.50% p.a., depending on your credit profile and chosen loan term.
However, the AIR alone doesn’t include any additional fees, so it can under-represent the full cost of borrowing.This is where the Annual Percentage Rate (APR) comes in.
What is the APR Rate?
APR stands for Annual Percentage Rate, sometimes called the “comparison rate.” It’s calculated by adding together the AIR plus any extra fees—like establishment fees charged by the lender and the Loansmart service fee—then expressing that total cost as an annual rate.
Because it folds in those fees, the APR rate gives you a clearer, apples-to-apples comparison between different loan offers.
Why the APR Rate matters
Focusing on APR means you won’t be surprised by hidden costs further down the track. A loan with a seemingly low AIR might come with high establishment fees or service charges that bump up your total repayment. By checking the APR rate, you see the true yearly cost, helping you pick the loan that actually saves you money over its lifetime
How Loan Term Impacts Total Repayment
Your chosen term—the number of months over which you repay—also has a big effect on total cost:
Shorter terms have higher weekly or monthly repayments but incur less total interest.
Longer terms lower your periodic repayments but increase the total interest paid.
Here are a couple of examples:
Example A: Borrow NZ$10,000 over 60 months at 10.95% AIR, with a Loansmart fee of NZ$745. Your weekly repayment is NZ$53.72, and you pay back NZ$13,967.70 in total, an APR of 14.4%.
Example B: Borrow NZ$10,000 over 60 months at 12.95% AIR, with a lender’s establishment fee of NZ$215 and a Loansmart fee of NZ$745. Your weekly repayment is NZ$57.33, and you end up repaying NZ$14,906.36—an APR of 17.12%
Want to try your own example? Use our free online loan calculator.
These comparisons show that a small difference in AIR can add hundreds more to your total repayment.
By comparing both AIR and the APR rate—including all fees—you’ll choose the option that minimises your total repayment.
Breaking Down Loansmart’s Fees
At Loansmart, we’re completely transparent about our fees, so you know exactly what you will be paying back.
Loansmart Service Fee
- What it is: A fee for Loansmart’s service in arranging your loan.
- How it’s calculated: Up to 5% of your loan amount plus NZ$245 (GST exclusive).
- Caps: Maximum NZ$995 for unsecured loans, NZ$1,995 for secured loans
- Payment: You can add it to your loan principal or pay it upfront.
Lender Establishment Fee
- What it is: Charged by the loan provider to set up your loan.
- Example: NZ$215 for a NZ$10,000 loan in our illustration above.
Early Settlement & Other Fees
- Early settlement fee: If you repay your loan early, you may face a fee for breaking the agreement before term.
- Other possible costs: Some lenders charge late-payment fees or account-keeping fees—always check the full disclosure.
Tips to Keep Your Loan Costs Down
- Shop by APR, not just AIR: Always compare APRs to see the true cost.
- Opt for the shortest term you can afford: Even trimming a few months can save on interest.
- Check for hidden fees: Inquire about establishment, service, settlement or late-payment fees before signing.
- Pay via direct debit: Ensures on-time payments and helps avoid late fees.
- Consider extra repayments: Some lenders let you pay more early with minimal or no penalty—check their early settlement policy.
Your Next Step with Loansmart
At Loansmart, we’re committed to transparency. We’ll show you the AIR, APR rate, all establishment and service fees upfront—so there are no surprises. You’ll know exactly what your loan will cost from day one. Ready to find the right loan term and APR rate for your needs?
Apply online today and get a free loan assessment with one of our friendly personal loan consultants.
