What’s the difference between interest rate and APR (Annual Percentage Rate)?
This is a common question when people are looking to borrow money and it is worthwhile taking a moment to understand the difference between the interest rate and the APR on a loan.
Put simply, the interest rate is what you pay on the money you have borrowed each year and is usually expressed as a percentage rate. The APR (Annual Percentage Rate) reflects the overall cost of borrowing, including interest and certain fees, expressed as a yearly rate to help compare products.
That means it is important to consider the APR when comparing different loan providers so ensure you understand the overall cost of borrowing and how it compares across lenders.
Why wasn’t I offered the interest rate and APR advertised?
Lenders will typically advertise a ‘Representative APR’ although this may not be the APR that you are offered. A ‘Representative APR’ means that at least 51% of applicants will receive the advertised APR, or lower. However, as most lenders will take into account your own circumstances when you apply, it is likely that the APR you are offered is not what you thought you were applying for.
Most lenders also vary the interest rate and APR depending on how much you are borrowing and for how long.
How are we different?
When it comes to interest rates and APR, our approach differs.
If you are eligible for a loan, the interest rate is fixed at 4%, regardless of loan amount or term. This means you know in advance that whether you apply to borrow £1,000 over 3 years or £15,000 over 15 years, the annual interest will always be 4%*.
As the only fee associated with our loans is a Land Registry fee of £20.00**, our Representative 4.2% APR stays close to the interest rate on our standard capital repayment loans.
For more information on other loan products, click here. Please contact us for more information about the loans that are available by filling out a contact form or calling 01823 461099.
This information is for general guidance only and does not constitute financial advice. Loan suitability will depend on your individual circumstances.
Representative Example (4% fixed interest rate, Representative 4.2% APR)
Loans are subject to status and are typically protected by a Title Restriction.
Borrow £5,000 over 120 months:
120 monthly repayments of £50.62
Total amount repayable = £6,094.71, including a £20 fee for registering the Title Restriction against your property at the Land Registry.
The £20 fee is only payable if a loan is agreed and you choose to proceed. No interest is charged on this fee.
A Title Restriction means that you may not be able to sell your home without our permission unless the loan is fully repaid.
Missing payments could affect your credit rating and ability to obtain credit in the future.
This is a financial promotion approved by Lendology CIC
