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Annual Percentage Rate

Annual Percentage Rate (commonly referred to as APR) allows the customer to compare the interest rates on loans, credit cards, mortgages and other financial products. It uses a single percentage marker.

This single percentage marker is used worldwide by all financial providers to allow consumers to easily see and compare the costs of borrowing across different financial products.

On our website, borrowers can easily compare the APR’s of guarantor lenders, ranging from 48.9% to 304%.

The Financial Conduct Authority requires that the lender be transparent about their costs. This means they must show the borrower the loan’s APR before the loan agreement is signed. That is why lenders clearly display the Representative APR with all their financial products which also includes interest, arrangement fees and admin fees.

‘Representative APR’ and ‘Typical APR’… What is the difference?

APR is very often given as ‘Representative APR’ by loan companies. Be forewarned that you may not actually get the Representative APR rate that has been advertised. There are many factors that determine whether or not you get this rate, including the length of the loan and whether you are risky to the lender.

‘Typical APR’ is different. 66% of successful customers receive this rate. So when researching loans, pay close attention to the ‘Typical APRs’ advertised. You may be more likely to get this rate.

Variable APR and Fixed APR. How do they differ?

On our website, some of the featured guarantor lenders offer Fixed and Variable APR.

A fixed APR is exactly what it sounds like. Its interest rate does not change over the course of the loan. It remains the same.

Interest rates charged on a loan with variable APR can go up and down during the loan term. This means that your loan could cost you more or less than initially predicted. Luckily, it is rare for the interest rate to change and is usually only stated as a formality. (see http://www.amigoloans.co.uk/question/variable-interest-when-does-it-change)

What determines the APR?

There are several factors that impact the APR:

Loan type: For instance, a property mortgage is considered a secured loan. If the borrower falls behind on this type of loan’s repayments, the property can be repossessed by the bank or lender and sold to recover the losses. This is why loans like these (with more security) usually have lower interest rates than unsecured loans.

In sharp contrast to a secured loan (i.e. mortgages) is the totally unsecured payday loan. With this type of loan there is nothing the lender can recover if the borrower goes missing or does not repay the loan. The loan provider must cover the cost of defaults and therefore they must charge a higher rate of interest, reflected in a higher APR.

Loan length: APR is calculated as though the loan lasts for a year i.e. as an annual interest rate. For loans like mortgages and personal loans which usually last for several years, the APR stays relatively low. But not for a product like a payday loan. These only last a few weeks. Customers pay a premium for these loans. Their interest rates get compounded over and over as though the loan lasts a year. APR’s for a payday loan can run in the thousands of percent.

Check out this table showing APR’s for different financial products…

Representative APR



2.94% – 3.69%


Credit Unions

13.68% (12 month loan)


Credit Cards



Guarantor Loans

48.9%-304% (1-5 year loan)


Payday Loans

1248.5% (6-month loan)


Factors that determine the rate of interest include the borrower’s individual credit history, income and employment status are taken into account. They are used to assess the risks an individual lender may be taking on. Therefore, it can affect the rates of interest and APR the borrower is offered. If a customer has bad credit, they may be charged slightly higher rates to make up for the risk. A borrower’s good credit history can work to her or his advantage when seeking a loan. As a result, the lender may offer a lower rate because their risk is less.

The lender: Every lender uses their own criteria to calculate different rates. Save time and money by using our comparison table. This could help find applicants identify the best product for them, before applying.