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How to calculate APR?

Written byKoyo Loans
First published17th October 2022
  • Introduction
  • How to calculate APR?
  • How does APR work?
  • How does credit card APR work?
  • How do you find APR?
  • Conclusion

In 30 seconds…

Calculating the APR of a loan or credit card application is crucial, as it illustrates how much it will cost to borrow money over the course of a year. Many sites, such as Koyo Loans, have loan calculators available for you to use, while lenders typically present a representative APR before offering you an actual APR following a credit check. APR is often variable, meaning it can change over the course of the credit agreement. Be sure to check out the representative APR published on a lender’s website as a starting point before proceeding with your application.


As a borrower, one of the most important aspects of applying for credit is the Annual Percentage Rate (APR) offered by lenders. Lots of things can influence the APR of a loan, so it’s vital you understand what the rate means and how to work it out. By the end of this article, you should have a much clearer understanding of APR and be able to effectively weigh up the best value credit that is available to you.

How to calculate APR?

To calculate the APR of a loan, you will need to take into consideration all the charges associated with borrowing money on top of interest. Working out the APR before agreeing to credit is the best way to compare the value of loans that are available to you.

The simplest way to do this is to use a loan calculator (like this one from Experian). You will need to know the loan amount, details of any finance charges, the rate of interest, and the stipulated borrowing term. The calculator will then work out how much you will be required to pay back each year, effectively working out your APR.

Many lenders advertise a representative rate of APR on their websites, which you can use as a guide as you conduct your research into the best value loan for your circumstances. But be mindful that the rate that you’re offered is likely to be different from the representative rate given on the site, and it should be used as a guide only.

At Koyo Loans, we have a loan calculator on our homepage, which provides you with a Representative APR for every loan amount and duration we offer.

How does APR work?

APR is an important factor in how much you pay to borrow money each year. It encompasses your agreed rate of interest, as well as any additional fees that are associated with the cost of borrowing money.

It is inclusive of lender fees, closing costs, and insurance, and is a much broader – and fairer – representation of the cost of borrowing money. Many lenders advertise their representative rate of APR, as the APR offered to customers largely depends on their current financial circumstances and credit history.

In some instances, the rate of APR is variable, meaning it can change over time. Other times, the APR rate is fixed for the entire period of the loan. It’s important to understand which type of APR is associated with the loan that you apply for, as it will influence how much you’re required to pay back each year.

How does credit card APR work?

Credit card APR indicates the cost of borrowing money on your card each year. For instance, it includes the total interest rate and annual credit card fee. Charges like withdrawals and missed repayment fees are excluded from the APR.

Something unique about credit card APR is that some banks offer a 0% interest period, which allows you to borrow money over a certain period of time without being subject to interest payments. The period varies from lender to lender, and it might be for six or twelve months. Once the zero per cent interest period is over, a new rate of interest will kick in.

Understanding the rate of APR on your credit card is really important, as it allows you to work out how much money you’re required to pay back. This helps you identify whether your credit card is charging you a reasonable rate of APR or whether applying for a loan for debt consolidation could be a viable option to get your credit card repayments back under control.

How do you find APR?

You can find the APR of a loan or credit card by visiting the lender’s website. Many lenders advertise their APR as a representative figure, which you can use as a guide as you conduct your research.

Be mindful of the fact that the rate of APR offered to you is likely to be different from the representative figure, as your credit score and current financial circumstances will be taken into account. This is why it’s important to only use representative APR as a guide and not as a guaranteed figure.

Once you submit your application, your chosen lender will offer you a rate of APR that is based on your credit file. As you might expect, for the majority of lenders, if you have a good credit score, you will be offered a lower rate of APR, and the opposite is true if you have a poor credit history.


No matter the form of credit you’re applying for, understanding the APR offered by a lender is crucial, as it indicates how much money you are required to pay back. When you fully understand APR, you can easily compare and contrast different loans until you find the best option for your personal circumstances.

Koyo Loans is the trading name of BETR Technology Ltd. Company No. 11483187. Registered Office: Huckletree Soho, Ingestre Court, Ingestre Place, London, W1f 0JL

Key Takeaways

There’s a lot to think about before applying for a loan or credit card, but APR is arguably one of the most important. It shows you how much it will cost you to borrow money each year, and you can use the figure given by different lenders to compare and contrast value. Most lenders advertise a representative APR on their websites before offering an actual APR when considering your application.

Be mindful that the APR can change depending on financial circumstances, which is why it is often described as variable. Customers with better credit scores will be able to access lower APRs than those with poor scores, so it’s a good idea to work on your credit score before submitting an application.

You can easily find a lender’s APR on their website, but be aware that it’s likely to change when you submit an application, as the lender will consider your creditworthiness. Ultimately, APR is a crucial metric to consider when you’re applying for any form of credit, so make sure you review the APR of several lenders before settling on the best rate for you and your family.

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