Certus Mortgage Solutions: Guidance on typical APR's

APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers. The APR takes into account not just the interest on the loan but also other charges you have to pay, for example, any arrangement fee.

All lenders have to tell you what their APR is before you sign an agreement. It will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around. Don't forget that sometimes bank loans are cheaper than the credit schemes offered by stores.

If you find a deal with a low APR, ask the following questions:

Does the interest included in the APR vary, or is the rate fixed? If the rate is variable, your repayments could go up or go down. If the rate is fixed, your repayments will stay the same.

Are there any charges that are not included in the APR? This could include something like optional payment protection insurance. If so, make sure you understand:

What they are;

Whether this is something you will really need;

How much you would have to pay; and,

When you would have to pay.

What are the conditions of the loan or credit and do they suit you? For example, do you have a choice about how and where you make the repayments? If you suddenly have spare money, can you pay the loan off early - without penalties?

Can you afford the monthly payments? A more expensive loan (with a higher APR) could have lower monthly payments if they are spread out over a longer period of time. That might suit you better if your budget is tight even though you would pay more in the long run.