Research undertaken by one of the UK’s challenger banks and published in March suggests that six million people in the UK have borrowed money without even knowing what Annual Percentage Rate (APR) means.
APR, or Annual Percentage Rate is the term used to outline the total cost of borrowing for a year. It includes standard fees and the interest you will pay.
Consumers can use the APRs published by lenders and brokers to compare the cost of borrowing from different lenders. However in making comparisons, it is important to understand two
- Always compare products on a like for like basis – this means the product and the length of agreement. A mortgage APR on a 40 year agreement is not the same as a personal loan agreement over 5 years.
- Understanding ‘Representative APR’ – this has to be displayed in all financial promotions covered by the Consumer Credit Act 1975