Annual Percentage Rate (APR)

Every firm in the business of lending money or advancing credit is required by law to quote this rate. It will be only one of a number of interest rates you may see quoted. It is also likely to be the highest of them.

Personal loans, credit cards, mortgages and overdrafts may all be quoted at introductory rates of interest that sound enticingly cheap. However, what those introductory rates fail to include are any arrangement fees you may be charged for loans and they also won't immediately reflect any higher rate of interest that your borrowings will ultimately revert to. This is where the APR comes in. It was originally introduced as part of the Consumer Credit Act of 1974.

The headline quoted rate on loans and credit cards may be the rate of interest you pay per month or per year, but it's the APR figures (usually shown in brackets) which calculates the total amount of interest that will be paid over the whole term of the loan.

The APR should also take into account any other charges which the borrower has to pay. So, if you see a 'too good to be true' loan offer, fixed at a surprisingly low rate for a short period of time, ask yourself how much it could really cost by checking out the APR - it is likely to be substantially higher.

Get professional help from a qualified independent mortgage advisor and see how much you could save on your mortgage payments. There's no obligation, just plain good advice.

See also: Financial Services, Mortgages