Understanding our APR
The APR stands for Annual Percentage Rate and is the interest payable on the amount borrowed and other charges expressed as an annual rate charge. All lenders have to tell you what their Representative APR is before you sign an agreement.
APRs are a good way of comparing similar products but are not so effective when comparing different products. The following table demonstrates this:
| Type of loan | Amount | Month | Total repayment | Representative APR | Actual interest |
|---|---|---|---|---|---|
| Installment | £500 | 36 | £653 | 19.9% | 31% |
| Installment | £500 | 60 | £766 | 19.9% | 53% |
| Payday | £500 | 1 | £625 | 1737% | 25% |
As you can see the Representative APR for the two installment loans are the same but the actual interest repaid as a percent of the loan is hugely different – and much lower with a payday loan.
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