APR Glossary
Clear, plain-English definitions for every Annual Percentage Rate term used in UK borrowing.
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APR
Annual Percentage Rate. The true yearly cost of borrowing money, expressed as a percentage. APR includes the interest rate plus all mandatory fees and charges. All UK lenders are legally required by the FCA to display APR on every credit product before you sign an agreement.
APRC
Annual Percentage Rate of Charge. The mortgage-specific version of APR. APRC includes the interest rate plus all mandatory costs associated with a mortgage — arrangement fees, valuation fees, and legal costs — calculated over the full lifetime of the loan.
Balance Transfer APR
The rate applied to debt moved from one credit card to another. Often 0% for a promotional period, allowing you to clear existing debt without paying interest. A small transfer fee of 1% to 3% typically applies.
Cash Advance APR
The rate charged when you withdraw cash using a credit card. Almost always higher than the purchase APR, with no interest-free grace period — interest accrues from the moment of withdrawal.
Daily Rate
The APR divided by 365. This is the rate at which interest accrues on an unpaid credit card balance each day. On a £1,000 balance at 22.9% APR, the daily rate is approximately £0.63.
Effective APR
The true annual rate after compounding is taken into account. The effective APR is what the UK regulatory framework requires lenders to display, ensuring it reflects the real cost of borrowing.
Fixed APR
An APR that is locked in for the full term of the loan and will not change regardless of movements in the Bank of England base rate. Most personal loans use a fixed APR, giving you certainty over monthly payments.
Introductory APR
A promotional rate offered to new customers for a set period, often 0% on balance transfers or purchases for 12 to 30 months. After the introductory period ends, the rate reverts to the standard APR.
Nominal APR
The stated interest rate before the effects of compounding are applied. The nominal APR is always lower than the effective APR because it does not account for interest being charged on previously accrued interest.
Penalty APR
A higher rate applied by some lenders when a borrower misses a payment, pays late, or exceeds their credit limit. Penalty APR can be significantly higher than the standard APR and may apply permanently once triggered.
Purchase APR
The interest rate charged on everyday spending on a credit card when the full balance is not paid by the statement date. Avoided entirely by paying the full statement balance by Direct Debit every month.
Representative APR
The APR that a lender must offer to at least 51% of successful applicants. The remaining 49% may be offered a higher rate based on their credit score. Always use a soft-search eligibility checker to find your personal rate before formally applying.
Standard APR
The permanent, ongoing rate that applies once any promotional or introductory period has expired. UK credit card standard APRs typically range from 19.9% to 39.9%.
Total Amount Payable
The total sum of all payments made over the life of a loan, including the original amount borrowed plus all interest and fees. Always check this figure alongside the APR to understand the true cash cost of borrowing.
Variable APR
An APR that can change over time, typically in line with the Bank of England base rate. Most UK credit cards use a variable APR. When the base rate rises, variable APR products usually increase their rates.
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