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What is APR?

Written byKoyo Loans
First published17th October 2022
  • Introduction
  • What is APR?
  • What does APR stand for?
  • What is a good APR for a credit card?
  • What is a good APR for a loan?
  • What does 0 APR mean?
  • What is a good APR for a car?
  • What does APR mean on a loan?
  • What is variable APR?
  • Conclusion

In 30 seconds…

An Annual Percentage Rating (APR) indicates how much it will cost to borrow money from a particular lender. APR encompasses interest and other charges associated with borrowing and is sometimes given as a representative figure. Lenders are legally required to inform you of the APR before offering you credit. You can expect to be offered loans and credit cards with an APR anywhere between 3% and 30%, depending on your credit score.


When comparing the value of different forms of credit, one of the most helpful metrics is the Annual Percentage Rate (APR) stipulated by the lender. If you’ve seen APRs displayed but aren’t entirely sure what they mean, read on to find out why it’s such an important figure to consider when applying for a loan.

What is APR?

APR (Annual Percentage Rate) is a figure that includes the annual interest rate charged for a loan, condensed into a percentage. Lenders advertise the APR of their loans to help borrowers easily understand how much interest they will need to pay back. The rate of APR takes into account the interest rate and other additional charges associated with an offer of credit, which allows you to calculate how much you will need to pay back over the course of the credit agreement.

Legally, lenders are required to tell you what the APR is before you agree to credit. APR is expressed as a percentage, and you can use it to compare the value of the loans that you’re applying for. For instance, a personal loan with 14% APR will typically be cheaper than one with 20% APR, but you should always read the terms and conditions carefully before agreeing to a credit arrangement.

Sometimes, a lender will give a representative RAPR, which indicates the maximum rate that at least 51% of customers receive. The APR that you’re offered will depend on your credit history and your current finances, so it’s important to realise that not everyone will receive the same rate. Still, you will be offered an exact APR before you sign a credit agreement.

What does APR stand for?

APR stands for Annual Percentage Rate and helps you understand the cost of borrowing money. When you’re planning to take out a loan, it’s important to look at the APR instead of just the rate of interest that you’re offered, as it provides you with a much clearer picture of the cost of the loan.

The APR takes into account the interest expense on the loan, as well as the costs associated with procuring the loan in the first place. However, the APR doesn’t include costs like late fees, so it’s vital that you make your repayments on time each month, so you aren’t stung by additional charges.

You should also be aware that the APR that you’re offered will depend on your credit history and your current financial circumstances. People with poor credit histories will typically be offered a higher APR than those with good credit scores, so you should be aware of this when you submit an application to your chosen lender.

What is a good APR for a credit card?

Credit cards typically charge 23% APR, so anything lower than this typically represents good value. Realistically, you can find credit cards with APRs of anywhere between 5% and 30%, and the rate that you’re offered depends on your credit score.

The best low-interest credit card deals are typically reserved for people with good credit scores, and it’s more difficult for borrowers with a poor credit history to access the best deals. Still, it’s best to shop around when you’re looking to take out a new credit card, as each lender reserves the right to offer a different rate.

You can use a comparison site like Money Supermarket to research the different credit cards that you can apply for. You can use the representative rate of RAPR as your guide, as it’s the best way to work out the best value loans. But remember, the rate of APR you are offered is likely to be different from the representative rate, so bear this in mind before submitting an application.

What is a good APR for a loan?

As a general rule of thumb, the lower the APR you’re offered on a loan, the better. Similar to credit cards, you can expect to receive an APR of between around 3% and 30% on a personal loan, but again, your credit history will influence the rate that you receive.

If you have a poor credit history, you’re likely to receive a high APR, while a low APR is available to customers with better credit scores. As such, it’s really difficult to say what a good APR is for a personal loan, as your personal circumstances will dictate the rate that you’re offered.

This is why it’s so important to conduct research into the market and not just settle for the first loan that you see. You can apply for personal loans from your bank or building society or from an online lender like Koyo Loans. We offer unsecured personal loans between £1,500 and £15,000 that you can use for various purchases and offer a simple and secure application process.

What does 0 APR mean?

Zero APR means that you can borrow money for a specific period of time without having to pay any interest or other associated fees. Of course, you will still have to pay back the money that you borrow, but if you make the repayments in time, you can successfully borrow money without being subject to interest.

You can find zero APR deals from various credit card providers, and they’re usually available for a set period of time, whether it’s six or twelve months, for instance. To take advantage of 0% APR deals, it’s best to plan to pay the money back within the period of free interest. If you’re smart with your repayments, this is one of the best and cheapest ways to borrow money.

You need to read the terms and conditions of the credit arrangement carefully, as interest and other charges will kick in after the initial period of 0% interest is over. This will be stipulated by the loan or credit card provider in writing, so make sure you’re aware of this before you agree to any credit arrangement that promises a 0% interest period.

What is a good APR for a car?

Car finance deals are offered depending on your credit score. Research shows that people with good credit scores can expect an APR of around 2-3%, while people with poor credit scores range between 14-15% for car financing applications.

This just goes to show how influential your credit score is when it comes to applying for car financing. Therefore, it makes sense to work on your credit score before submitting an application for car financing. You can do this by making your repayments on time and by ensuring the details listed on your credit file are accurate.

Another great way of accessing the finance to pay for a car is to apply for an unsecured personal loan. At Koyo Loans, we provide personal loans of between £1,500 and £15,000 that you can use to fund the purchase of a new vehicle. A personal loan is a viable alternative to PCP and other car financing arrangements and is often easier to apply for.

What does APR mean on a loan?

On a loan, much like other financial offerings, APR means the annual percentage rating. As mentioned above, it refers to the amount of money you’re required to pay back each year and is given in the form of a percentage. The rate of APR includes your interest payments as well as additional fees attached to the credit arrangement.

It’s helpful to compare the APR of various loans before submitting an application, and you should be aware that the rate that you’re offered will depend on your credit history and your current financial circumstances. Borrowers with poor credit histories will be offered a higher APR, while the converse is true for people with good credit histories.

If you don’t have the best credit history, you might have more luck applying to an online lender that uses Open Banking to ascertain your suitability for credit. At Koyo Loans, we use Open Banking to ascertain your current financial circumstances and don’t rely solely on your credit history before making a decision about your application.

What is variable APR?

Variable APR means that the annual percentage rate of your loan can change over time. Most credit cards come with variable rates of APR, and the rate can go up or down depending on the current financial situation.

Although this might seem a little unsettling, banks and loan providers can’t just adjust your rates without notice or beyond reason. A variable APR is attached to an index that fluctuates over time, which will lead to a change in the rate of interest that you pay throughout the duration of your loan.

As well as credit cards, variable APRs are found within mortgages, bonds, derivatives, and other types of credit. If you don’t like the idea of accessing a loan with a variable APR, you can instead opt for a fixed APR, which doesn’t fluctuate over time and stays at the same rate from the start to the end of your loan period.


Understanding the APR of any form of credit is an essential starting point for all borrowers. It explains clearly the cost of borrowing money and allows you to easily draw comparisons between different lenders. So, before agreeing to borrow money, make sure you’ve done your research and are aware of the APR and what it means.

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

If you’re hoping to borrow money, the APR is an extremely important number to consider. It shows you the annual cost of borrowing money and makes it easy for you to compare the value of credit from lender to lender. Lenders display their representative rate of APR as standard and then offer you an actual APR based on your personal finances.

Borrowers with better credit scores will be able to access credit with a lower APR and vice versa. Therefore, it makes sense to work on your credit score before applying for credit, as it will help you access a better APR. You should be mindful that credit is often offered with a variable APR, meaning the rate can go up or down, depending on the current financial situation.

Realistically, you’re likely to be offered an APR of anywhere between 3% and 30% when you apply for a personal loan or credit card. Many credit cards offer a zero APR period at the start of the agreement, meaning you can borrow money initially without paying interest. Ultimately, the APR is a crucial figure to understand and provides you with a clear picture of how much it will cost you to borrow money from a lender.

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