If you've ever borrowed money or applied for a credit card, chances are you've heard of Annual Percentage Rate (APR). APR is an important way of understanding how to compare loans from different providers. It represents the cost of a loan over a one-year period, and is shown as a percentage of the money you are looking to borrow. To put it more simply, APR is a number that represents the cost of the loan.
For example, if you took out a £100 loan that had a 50% APR, you would expect to repay £50 after a year (plus the £100 you borrowed). The APR factors in all the standard costs the lender charges for a loan, such as the monthly interest rate and any setup or administration fees. It won't usually account for avoidable costs such as late payment charges. (PaydayUK does not charge arrangement or setup fees, so these do not form part of our APR.)
Lenders are required by law to show the APR of their loans so that consumers can easily make comparisons between different products. However, when you borrow from short-term lenders such as PaydayUK, you will usually repay the loan after several weeks or months, rather than a whole year.
This means the APR isn't necessarily the clearest way to show how much a short-term loan actually costs. It may be better to look at other measures, such as the daily rate of interest per £100 borrowed.
The actual cost of a loan depends on a number of things, including how much you borrow, in how many instalments you plan to repay it, and your own financial situation. To get a better idea of how much a loan from PaydayUK actually costs, use our calculator. Our calculator gives a typical example of the actual cost of borrowing from us, based on the amount borrowed and the length of time taken to repay.
What is representative APR?
You might see the phrase "representative APR" used on lenders' sites. This simply means it's the rate that most customers (that is, more than half) will be offered, although not everybody will get exactly the same rate. You can use the representative APR as a general guide to how competitive a lender is.
The lower the APR of your loan, the less you're paying to borrow.