APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers. Find out more, including what to ask a lender.

The APR includes important factors such as:

All lenders have to tell you what their APR is before you sign an agreement. The APR will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around.

But don’t just look at the APR. It doesn’t include all the costs associated with a credit agreement – such as charges for late or missed payments, or balance transfer fees on a credit card. And the APR works best if you are comparing similar types of credit, over similar periods. Also look at the total amount payable – and check that you can afford the repayments.

APRs are also a good way of comparing similar products but are not so effective when comparing different products. The following table demonstrates this:

As you can see the APR for the two installment loans are the same but the actual interest repaid as a percent of the loan is hugely different – and much higher than a payday loan.