APR stands for the Annual Percentage Rate of charge and you can use it to compare different credit and loan offers.
The APR includes important factors such as the interest rate you must pay, how you repay the loan, the length of the loan agreement, frequency and timing of instalment payments and amount of each payment, as well as details of certain fees that are associated with the loan.
All lenders have to tell you what their APR is before you sign an agreement, other than in the case of overdrafts. The APR will vary from lender to lender but normally, the lower the APR the better the deal for you. This is why it is important to shop around if you are thinking about borrowing or taking out a loan.
However, the APR is not the only way to judge the best deal on a loan, as it does not include all the costs associated with a credit agreement, such as charges for late or missed payments, or balance transfer fees on a credit card. The APR works best if you are comparing similar types of credit, over similar periods. You should also look at the total amount payable and check that you can afford the repayments.
Baines and Ernst Ltd