Annual Percentage Rate

Used to describe the true cost of the money borrowed on mortgages, loans and credit cards.

REMARKS

This is the total charge of borrowing on items like credit cards expressed as an annual compounding.

It includes, in addition to interest charges, most other charges that affect the cost of borrowing, such as arrangement fees for a loan.

This rate helps customers compare interest rates

As all lenders calculate APR exactly the same way, it enables you to make direct cost comparisons between lending products.

So if one building society is offering you a mortgage at 4.8% plus an arrangement fee of £600 and a bank is offering you an interest rate of 5.2% with a £150 fee, then the APR figures will show you which of the two mortgages is cheapest.

When you see X% APR variable , this means that the cost is currently X% but the interest rate is not fixed and from time to time the interest rate is likely to vary (up or down).

The second variant is X% APR Typical variable. You'll frequently see this _expression in promotions for loans. It means that the lender is not being totally specific about the interest rate you will be charged as their rates vary, usually in response to your personal credit rating and the amount of money you want to borrow. Therefore X% APR Typical variable is used to give you a general idea of what interest rate you can expect to pay. The addition of the word "Typical" means that at least 66% of their approved applications are offered that rate or cheaper. Then when a loan offer is confirmed to you, the paperwork will disclose the actual APR or APR variable you are being offered.