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Estimates an annualised cost including fees so you can compare offers like-for-like. Illustrative, not a statutory APR.
What APR is
The annual percentage rate expresses the yearly cost of a loan as a single percentage, combining the interest rate with any compulsory fees. Because it is standardised, two lenders quoting the same APR are genuinely charging the same for credit — which the raw interest rate alone can never guarantee.
APR versus the interest rate
The interest rate is only part of the picture; it ignores fees. A loan at 9% with a hefty arrangement fee can have a higher APR than a loan at 11% with no fee. The APR is the one that tells you which is actually cheaper.
Watch for flat rates
Some finance is quoted as a flat rate, charged on the original balance for the whole term even as you repay. A flat rate always understates the true cost — its APR is far higher. See flat rate vs APR to avoid the trap.
Where APR is less useful
For very short-term facilities, APR can look alarmingly high simply because it annualises a short cost — a genuinely small fee over a few weeks becomes a large annual percentage. For these, compare the actual pounds and the total cost of credit instead.
Compare with the calculator
Enter your amount, rate, fees and term to see the effective cost and compare offers.
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Frequently asked questions
What is the difference between APR and interest rate?
The interest rate is the charge for borrowing alone; APR adds mandatory fees and annualises the whole cost. APR is the fairer basis for comparing loans because it captures fees the raw rate ignores.
Why does a short-term loan have such a high APR?
APR annualises the cost, so even a modest fee over a few weeks scales up to a large yearly percentage. For short facilities, compare the actual pounds repaid rather than relying on APR alone.
Is a lower APR always the better loan?
Usually, for the same amount and term. But check the total repayable and the flexibility too — an early-repayment option or no arrangement fee can make a slightly higher APR the better deal in practice.
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