Banking & credit
Understanding APR in the UK
What APR means on loans and credit cards, and why it matters for total cost.
Updated May 2026 · 5 min read
General information only — not financial, legal or tax advice. Rates and rules change; check GOV.UK or official resources before making decisions.
What APR means
APR stands for Annual Percentage Rate. It shows the yearly cost of borrowing as a percentage, including interest and most mandatory fees. Lenders must display APR so you can compare products on a like-for-like basis.
A higher APR means borrowing costs more over time. A £5,000 loan at 10% APR costs less in interest than the same loan at 20% APR, assuming the same repayment schedule.
Representative APR vs your rate
Advertised “representative APR” is the rate at least 51% of accepted applicants receive. You might be offered a higher rate depending on your credit history, income and the lender’s criteria.
Always check the APR in your credit agreement — that is the rate that applies to you, not necessarily the headline rate in an advert.
Credit cards vs personal loans
Credit cards often charge daily interest on your balance if you do not clear it in full each month. Minimum payments mostly cover interest and only a small amount of capital, which is why balances can linger for years.
Personal loans usually have fixed monthly payments over an agreed term. The APR reflects the total borrowing cost spread across those payments.
How to reduce interest costs
Pay more than the minimum on credit cards, switch to a 0% balance transfer deal if eligible, or consolidate expensive debt into a lower-APR loan — but check fees and whether you can afford the new payments.
Use our credit card and loan calculators to estimate payoff time and total interest before you borrow or change your repayment plan.
Try the calculator
Put this into numbers with our free UK calculators.
Need free help? See our useful UK resources including MoneyHelper and StepChange.