APR is an abbreviation of “Annual Percentage Rate of Charge” which allows you to quickly and very easily compare the profitability of consumer loans offered by different financial institutions. This indicator tells you about the total cost of the credit offered, i.e. not only the amount of interest required, but also all the other necessary expenses associated with the loan. The APR is given as a percentage per annum (p.a.). All consumer credit providers are legally obliged to state the APR.
What does the APR include?
Banks or non-bank consumer credit providers may charge you various additional fees. For example, the lender’s price list may include fees for assessing the loan application, concluding the contract, maintaining the loan account, fees for transferring funds, etc. All necessary expenses related to the loan must be included in the APR. However, there are also fees that do not have to be included in the APR. In the case of a mortgage, for example, there is a fee for the valuation of the property or payments to the Land Registry.
Loan selection by APR
When evaluating individual loan offers according to the APR, a simple rule applies – the lower the APR, the better the loan. When choosing a loan provider, it is also worth looking at other conditions. For example, by arranging additional products with one financial company, you may be able to get a better interest rate or other advantage.