Annualised Percentage Rate (APR)

The APR helps to identify the true cost of borrowing and to provide the consumer with a method of comparing the true costs of different loans. It is a legal requirement that a true APR figure be provided with any loan illustration.

The APR calculates the total amount of interest that will be paid over the whole term of the loan and is usually considerably higher than the headline quoted rates. In addition the APR should also take into account any other charges which the borrower has to pay.