What is APR?
APR means Annual Percentage Rate. It is designed to show the annual cost of borrowing after compulsory fees and charges are included. That makes it more useful than the headline interest rate when you are comparing loans from different lenders.
Why does APR matter?
A loan with a lower interest rate can still be more expensive if it has a large arrangement fee, compulsory insurance, or a longer repayment term. APR pulls those mandatory costs into one comparable rate, while the total cost figure shows how much you will actually repay in pounds.
Representative APR explained
UK lenders advertise representative APR. This means at least 51% of successful applicants must be offered that rate. Your actual APR can be higher or lower depending on the loan amount, term, credit score, affordability checks, and whether any mandatory fees apply.
APR vs EAR vs AER
APR is normally used for borrowing. AER is used for savings accounts and shows the annual return including compounding. EAR is often used for overdrafts and shows the effective annual rate without optional fees. For loan comparisons, APR and total amount repayable are the two figures to check first.