What Is APR? A Simple UK Guide

APR in one sentence

APR (Annual Percentage Rate) shows the yearly cost of borrowing as a single percentage — including interest and most mandatory fees — so you can compare products fairly.

Higher APR = more expensive borrowing. Lower APR = cheaper, all else equal.

Representative APR vs your personal APR

Advertised “representative APR” is the rate at least 51% of approved applicants receive. You might get a higher rate based on credit score, income and debt levels.

Your credit agreement states your personal APR — that is the number that matters for your repayments.

APR on personal loans

Personal loans usually have fixed monthly payments over an agreed term. APR spreads the total cost (interest plus fees) across the loan life.

A £10,000 loan at 8% APR over 5 years costs less total interest than the same loan at 15% APR. Use our loan repayment calculator to compare.

APR on credit cards

Credit card APR applies when you carry a balance past the due date. Interest is calculated daily, not once a year — so the effective cost depends on how long you borrow and how much you repay.

Purchase APR, balance transfer APR and cash APR can differ on the same card.

APR on overdrafts

Arranged overdrafts quote an EAR (Effective Annual Rate) or APR. Unauthorised overdrafts may charge higher rates or daily fees instead — always check both interest and flat fees.

See our guide on overdraft fees for how daily charges stack up alongside APR.

APR vs interest rate

Interest rate is just the cost of borrowing money. APR includes interest plus compulsory charges (e.g. arrangement fees on some loans). APR is the better comparison figure for most consumer products.

0% APR offers

0% purchase or balance transfer deals mean no interest for a promotional period. Miss a payment or fail to clear the balance in time and high standard APR may apply to what remains.

How to compare borrowing

Compare APR on the same product type (loan vs loan, card vs card). Check total amount repayable and monthly affordability — not just the headline rate.

Run the numbers

Use our loan, credit card and overdraft calculators to translate APR into monthly costs and total interest before you borrow.