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If you’re looking to apply for your first personal loan, you may have come across a variety of different phrases commonly used in the financial world. One of those phrases is one you’ve probably already encountered – and that’s APR. Wondering how APR works on a loan? Keep on reading…

What is APR?

However you borrow money, you will be charged a rate of interest that must be paid back. APR stands for ‘annual percentage rate’ and brings together all of that interest with additional fees for a whole year, which could include a start-up cost or origination fee. An APR is useful because it doesn’t just show you the interest rate on a loan, therefore putting otherwise hidden fees in plain sight. APR rates are used in almost all types of borrowing, providing you with an easy to understand figure that helps you compare lenders.

Representative APR is another commonly used term within the financial world and is a little different from a ‘normal’ APR rate. When using a personal loan calculator or an advertised APR rate, you will see a figure that must be presented to at least 51% of approved loan applicants. This figure is known as Representative APR and gives you a good idea of the kind of rate you will likely be offered after the application process. 

How can I work out what my APR rate will be?

Your APR rate will vary depending on a variety of elements. These are three of the main factors that will determine the APR rate you’ll receive on your personal loan.

Loan length

The length of your loan is a key factor in determining your APR rate, with Koyo Loans offering loans from 6 months to 5 years. APRs will likely be higher for shorter-term loans and the opposite for longer ones.

Loan amount

The amount you choose to borrow from a lender will also have an impact on your APR rate. In contrast to loan length, a smaller number will increase APR, while a larger loan will lower APR.

Your circumstances

Every borrower is in a different financial situation, so it’s important for lenders to ensure that borrowers are in a good position to pay back a loan in full. For this reason, lenders will take a look at credit profiles and some, such as Koyo Loans, will make use of Open Banking data to fairly assess a borrower’s finances. Ultimately, this will have a significant impact on the final APR rate.

How can I get better APR rates from online lenders?

There are a few ways to receive higher APR rates, and most of them are in your control! Firstly, improving your credit score should be number one on your priority list. If you regularly make repayments on time, build up your credit score and keep your credit utilisation low, you could be able to give your profile a big boost. 

Secondly, finding the right lender for your financial situation is also key. Different lenders offer different rates and use varying methods for assessing your applicability for a loan. For example, here at Koyo Loans, we don’t just use your credit score to assess your application. While a credit score does play its part, we also use Open Banking data, to supply us with a fairer, more accurate view of your finances. 24.9% APR Representative.


Fairer and more realistic – Koyo Loans offers personal loans between £1,500-12,000 and assesses your financial situation using Open Banking data, not just your credit score. Use our loan calculator to determine your representative rate and send an application here today. www.koyoloans.com. 24.9% APR Representative.

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