APR Calculator
Calculate the true Annual Percentage Rate (APR) including all fees and charges. Use APR to compare loans and credit products on a like-for-like basis.
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APR Guide
What is APR?
APR (Annual Percentage Rate) is the standardised rate that includes both the nominal interest rate and all mandatory fees, expressed as a yearly rate. UK law (Consumer Credit Act 1974) requires all credit advertisements to show the APR, enabling consumers to compare products on equal terms. A loan advertised at 8.9% nominal rate with a £250 arrangement fee has a higher APR than the headline rate suggests. The representative APR must be the rate offered to at least 51% of approved applicants — so two loans with identical headline rates can have very different APRs once fees are included, which is exactly why APR — not the headline rate — is the number to compare.
What's the difference between APR and EAR vs Nominal Rate?
Nominal rate: the base interest rate before compounding or fees. EAR (Effective Annual Rate): the actual yearly cost accounting for compounding frequency (monthly compounding produces a higher EAR than annual compounding at the same nominal rate). APR: EAR plus all mandatory fees spread over the loan term. Example: 0.8% monthly rate = 9.6% nominal = 10.03% EAR = higher APR if fees apply. For credit cards, AER is rarely meaningful — the balance changes constantly. For mortgages, the APRC (Annual Percentage Rate of Charge) is the standard comparison figure lenders must quote for mortgages, combining interest and most fees into one number.
What should I know about Comparing Loans Using APR?
APR allows direct comparison between loans with different structures. A loan at 9% nominal with a £200 fee versus one at 10% with no fee: the APR calculation reveals which is actually cheaper for your specific amount and term. Generally, fees matter more on short-term loans (where they are spread over fewer payments) and less on long-term loans (where they are diluted). Payday loans often have nominal rates of 1–3% per day, producing APRs of 1,500%+, which is why APR comparison is particularly important for short-term, high-cost credit, where a seemingly modest daily or weekly rate compounds into an enormous headline APR.
What should I know about Minimising Borrowing Costs?
Always compare APR rather than monthly payment (which can be reduced by extending the term while increasing total cost). Check for early repayment charges (ERCs) — some loans penalise you for paying off early, which matters if your circumstances might change. For mortgages, compare the APRC over the full mortgage term but also understand the initial deal period APR. For credit cards used for purchases (not cash advances), a 0% purchase period card has an effective APR of 0% during that period —