Understanding APR, Interest Rates and Repayments

In the world of finance, there is plenty of jargon floating around which can cause it to seem more complex and dense than it is in reality.

When applying for a loan, it is incredibly important that you know exactly what you are signing up for, and how APR, interest rates and repayments will affect your finances.

Here is some information to help you break down APR, interest rates and repayments.


Standing for annual percentage rate, APR is the annual rate that you are charged for any loan which you may take out. In essence, it can provide you with a clear figure for what you can expect to pay for a loan on a yearly basis.

This is incredibly useful when comparing different lenders, as they can often differ greatly with regards to their various fees and rates.

APR is displayed in the form of a percentage, which you can use to calculate repayments. Bear in mind that some APRs are fixed, whereas others are variable, meaning that they could change at any time.

Interest Rates

Understanding APR, Interest Rates and Repayments


Nearly every loan will have an interest rate applied to it. This is the rate applied to the overall sum of money you have borrowed which is added onto repayments.

It is worth bearing in mind, however, that interest rates can vary greatly depending on the loan type, and can sometimes be more complicated than they at first seem (additional fees, terms and conditions), so it is always worth reading the small print.


When you take out a loan, it will need to be repaid, usually by a certain time. Most repayments are made on a monthly basis, although they can vary greatly in this regard.

Before taking out a loan, you should have a sound repayment plan in place to ensure that you can meet repayments (taking into account interest).

Failing to meet repayments can have significant consequences, not least because your credit file could be adversely affected, potentially stopping you from receiving prime interest rates on finance products in the future.

These are undoubtedly some of the most important terms you will come across when applying for a loan. Make sure you fully understand them before making an application, and always make repayments on time.

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Poppy is a money-saving expert in the UK.