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Personal loans: what you need to know

What is APR?

By Rob Goodman

Article 3 of 3

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What is APR?

Discover what APR actually means with our handy video guide.


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Video transcript

You have probably seen the term APR in ads or in statements of your credit card loan, or mortgage, it's everywhere but there is confusion in about what it means whether or not it's different from the plain old interest rate. APR stands for Annual Percentage Rate and unlike an interest rate an APR includes any compulsory fees you have to pay, so the APR on a credit card includes an annual fee if there is one.

The APR is meant to be a standardize way of showing the total cost of borrowing over a year, so you can not only compare different credit cards but also different some products such as taking out loan verses taking out a credit card, It's not so perfect measure of the total cost of borrowing for one thing it's based on scenarios so the APR for credit cards for example is based on owing 1200 pounds.

When a company quotes a representative APR you're not guaranteed to get that rate most people do get it but the company may up the rates if it thinks you're a higher risk Which is pushing the industry to make comparisons more accurate but for now the APR is the best there is.

To compare credit cards not
just by APR but also by their deals and quality of service you get form the credit card provider visit

What is APR?

You'll see the abbreviation 'APR' used in adverts for credit cards, loans and mortgages. 

In this two-minute video, Which? explains what APR stands for and how it's different from a standard interest rate. 

The video also explains why some credit card customers are offered a higher or lower APR than others.

Which? Money Compare – lets you search hundreds of credit cards to help you choose the most suitable deal for you based on quality of service as well as cost and benefits.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.