What is APR (Annual Percentage Rate)?

The APR or Annual Percentage Rate is a measure of the cost of a loan. It is a standard way of comparing loans over the same term (period of the loan) with different lenders. Whether you are looking at a secured loan or an unsecured loan , you can ask the lender what the APR for your loan is and they must provide you with the rate. Generally, the lower the annual percentage rate for a loan the cheaper that loan will be.

Included in the calculation of the APR is the interest on the loan, the charge for arranging the loan or completion fee and some other charges. If the APR quoted is variable then your repayments will also be variable. If a fixed rate is used then your repayments should also be fixed. The APR will usually not include costs for payment protection which the lender may ask you to take up, and will usually not include the charges for early repayment of the loan, exit charges and some related fees.

Loan Calculator

With a loan calculator like the BBC Mortgage Calculator you can vary the interest rates, loan amounts and the term to see how much you have to pay each month.