Understanding the interest rates and the Annual Percentage Rate (APR) of your financing agreement is crucial when considering the financing options you have. Here's a detailed guide to help you navigate these aspects.
What’s the difference between an interest rate and an APR?
These are both important terms when it comes to borrowing money, but they can serve different purposes:
Interest Rate: This is the percentage of the original amount you borrowed that you'll pay as interest every year. For example, if you borrow $1,000 with a 5% interest rate, you will pay approximately $50 in interest over a year. It reflects the cost of borrowing the principal amount.
APR (Annual Percentage Rate): Your APR reflects the total cost of your loan. It includes any interest, but it also includes other fees such as an origination fee. In general, an APR provides you with a more comprehensive view of the total cost of borrowing your tuition, incorporating both interest and any additional fees.
Typical terms offered through Fortify
We’re committed to providing fair and transparent pricing. We aim to design loans offered through Fortify to be affordable and predictable, to help you manage your payments.
Our APRs on loans (annual percentage rates) range from 0.00% to 23.99%, and they include the total cost of the loan, including interest and any fees.
Our APRs on payment plans (annual percentage rates) range from 0.00% to 10.99%, and they include the total cost of the payment plan, including interest and any fees.
We strive to keep APRs as low as possible and to offer fair, clear, and competitive rates. We also keep monthly payments fixed, which can help with stability and predictability.
What determines my APR?
Several factors will influence the precise APR you receive from Fortify or from third-parties like banks and credit unions that offer loans on Fortify's platform. For example, here's an incomplete list of some factors that might influence your terms:
Amount requested: The total amount you wish to borrow can impact your financing terms.
Your state of residence: Federal and state lending laws and regulations will affect the terms and rates offered.
School or program: The career you are pursuing or the program you’re attending may affect your final rates, possibly reflecting the income potential associated with your field.
Term length: The duration of your repayment term could influence the rate, with longer terms potentially having different rates than shorter ones.
Your financial history, such as your credit score: Your past financial profile and credit score may affect the loan terms that you receive.
How does Fortify calculate interest?
If you decide to accept a financing plan offered through Fortify, interest will accrue daily based on the fixed interest rate provided in the Final Disclosure Statement when you sign your loan agreement.
Here's a simple example. Let's say that you have a $10,000 original balance, with a fixed interest rate of 8% annually.
To calculate the interest added to your balance each day, you would first divide your annual interest rate by 365 days. 8% divided by 365 is approximately 0.022%. This means that, if your loan balance is $10,000, then in this example the interest added each day would be 0.022% of $10,000, or around $2.20.
If you make payments and reduce your balance, then the interest added each day would go down as well. For example, if after making some payments, your remaining balance is now only $9,000, then each day the interest added would be 0.022% of $9,000, or only $1.98 per day. As you pay off your balance over time, the interest that is added each day will go down as well.
It's important to know that if you don’t make payments, your unpaid interest might be capitalized into the principal amount under certain circumstances. When unpaid interest is capitalized, it means that it’s added to your balance, so in the future, interest will also accrue on the previous interest that was capitalized, as well as on the original balance. For more details on when and if unpaid interest might capitalize into your loan, please review your financing agreement in detail.
Summary
If you have any further questions or need clarification, please reach out to Fortify’s customer support team - we’ll be happy to help.