Annual Percentage Rate (APR) explained

Annual Percentage Rate (APR) is a financial tool that will help you understand all costs involved in your loan beyond just the interest rate.

Loan providers structure their products differently, so by using APR to understand the total cost of your loan, it makes it much easier to compare offers from different providers.

It’s important to note that APR is not the rate at which interest accrues on your loan.

Industry regulations mean that APR is made up of the following:

Interest rates
Fixed margin
Variable rate
Costs such as (but not limited to)
Transaction/origination
Servicing
Repayment
How interest is charged
Simple vs Compound
Loan schedule
Disbursement schedule
Repayment tenure
Fee dates

This means that APR is always a higher percentage than your interest rate, because it includes all costs.

By using APR, you can compare the cost of competing loan offers against one another. Note, however, that APR can differ between lenders as it may be calculated differently based on varying repayment terms.