What is APR?

Annual percentage rate.

APR is the official rate to help you understand the cost of borrowing any amount. Your lender should always disclose the APR before you sign any agreement.

APR can be a good way to compare credit cards to see which would work out cheaper for you.

 

How does APR Work?

APR includes both the standard fees and interest you’ll have to pay on your borrowing over the course of the year. It’s usually added to the amount you owe on a monthly basis.

If the APR on your credit card is 17% this means you will owe 17% of the total amount owed to them in interest, on top of the total amount.

Often the interest rate isn’t the only cost of a credit card. To account for this, APR considers both a card’s interest rate and any other standard fees. This means that the APR percentage offers a more complete picture of how much borrowing will cost.

 

What is a good APR?

The APR you are offered will often be dependent on your credit score, the less of a risk you appear to be to lender’s then your APR could be lower too.

Credit card rates can vary, typically between 5% to 30% APR.

The lower the APR, usually the lower the cost of borrowing will be and this will make your payments cheaper if you are late or miss any amounts.

 

Types of APR

Fixed – If you have borrowed a fixed amount then such a loan or mortgage, having a fixed APR will make your payments more predictable as the APR won’t change.

 

Variable – The lender or bank can change the APR at any time and is often tied to the interest rates. This can make it harder to financially plan.

 

Representative APR – This is the advertised rate and means that a majority of applicants will get a APR of the same or lower than the representative.