What is APR?

APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers.

The APR is a standard way of showing the costs of borrowing, so you can work out which option is the cheapest. The APR will vary from company to company and between products. The APR works best when comparing similar types of credit over similar periods.

The APR includes important factors such as:
the interest rate you must pay;
how you repay the loan such as the length of the loan agreement (or term), when you should make the repayments, and amount of each payment); and
certain fees associated with the loan.

All lenders have to tell you the APR before you sign an agreement (except overdrafts). The APR will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around.

In advertising, the APR is shown in a ‘representative example’, and more than half of new customers should get this rate or better. Check whether the rate you’re offered differs from the advertised rate and check again before you sign the credit agreement. It may be higher if you have a poor credit history.

But don’t just look at the APR. It doesn’t include all the costs associated with a credit agreement – such as charges for late or missed payments, or balance transfer fees on a credit card. And the APR works best if you are comparing similar types of credit, over similar periods. Also look at the total amount payable – and check that you can afford the repayments.

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