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APR stands for "annual percentage rate". APR describes the true cost of the money borrowed on mortgages, loans, and credit cards.
The calculation to arrive at an APR takes into account the basic interest rate, when the interest is charged (i.e. annually, monthly or daily), all initial fees and any other lending costs you have to pay. As by UK law, all lenders have to calculate APR exactly the same way, it enables you to make a direct cost comparison between lending companies.
So if one lender offers you a loan at 8.8% plus an arrangement fee of £100 and a bank offers you an interest rate of 9.5% with no fee, then the APR figures will show you which of the two loans is cheapest.
There are then two additional expressions that use APR. When you see X% APR variable , this means that the cost is currently X% but the interest rate is variable and from time to time you can expect the interest rate vary (up or down).
Another expression is X% APR Typical variable . You will frequently see this expression in connection with loans. It means that the lender cannot be totally specific about the interest rate you will offered as their interest rates vary, usually in response to your personal credit rating and the size of the loan you want. Therefore, the term X% APR Typical variable is used to give you a general idea of the interest rate you can expect to pay. The addition of the word "typical" means that at least 66% of the lenders loan offers are made at that rate or cheaper . Then when a formal loan offer is confirmed to you, the paperwork will always tell the actual APR or APR variable you are being offered.
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