Annualised Percentage Rate (APR)

Annualised Percentage Rate (APR) is a figure that shows the overall cost of a loan over a year. Instead of looking at interest alone, it combines the interest rate with the fees charged by the bank, to understand the cost of borrowing.

It is mainly used to compare different loan offers. For example, two loans may have similar interest rates, but the one with higher banking / arrangement fees will have a higher APR. 

This makes APR a more reliable way to understand which option is cost effective. It is important to note that APR usually covers only the charges that are built into the loan. Fees that depend on behaviour such as late payment penalties or early settlement charges are not normally included.