1. What is APR?

The Annual Percentage Rate (APR) is the total cost of borrowing expressed as a yearly rate. In the UK, APR includes the interest rate plus any standard fees or charges, giving you a complete picture of the loan's cost.

2. How APR is Calculated

The calculator uses the standard APR formula:

Where:

• \( r \) — Annual interest rate (as decimal)
• \( n \) — Number of compounding periods per year

Explanation: APR accounts for compound interest, showing the true annual cost of borrowing when interest is calculated more frequently than annually.

3. Importance of APR in UK Loans

Details: UK lenders must display APR by law, allowing borrowers to compare loans more easily. A lower APR generally means a cheaper loan, but check for any excluded fees.

4. Using the Calculator

Tips: Enter loan amount in £, interest rate as percentage, term in years, and payment frequency. Results show APR, monthly payments, and total costs.

5. Frequently Asked Questions (FAQ)

Q1: Is APR the same as interest rate?
A: No, APR includes fees and charges, while the interest rate is just the cost of borrowing the principal.

Q2: What's a good APR in the UK?
A: Rates vary by loan type. As of 2023, personal loans typically range from 3% to 20% APR depending on creditworthiness.

Q3: Does APR include all fees?
A: UK APR includes standard fees but may exclude late payment fees or optional insurance.

Q4: How does payment frequency affect APR?
A: More frequent payments (weekly vs monthly) can slightly increase the effective APR due to compounding.

Q5: Is representative APR accurate?
A: Representative APR shows the rate at least 51% of successful applicants get - your rate may differ based on credit score.