Article
Understanding the APR before you sign a loan
The advertised rate is not what the loan costs. The annual percentage rate includes the fees. Here is how to read it.
Understanding the APR before you sign a loan
Two loans at the same nominal rate can cost very different amounts. The difference is the fees, and that is exactly what the annual percentage rate takes in.
What the nominal rate leaves out
The nominal rate pays for the money lent. It ignores the arrangement fee, which is paid on release and weighs more heavily the shorter the loan.
The counter-intuitive mechanism
On a short loan it is the fees that drive the APR, not the rate. A 2 % fee taken on release and spread over two months annualises to more than sixteen points. The same 2 % over eight months costs only five and a half.
What to ask for
The annual APR, fees included, for the amount and term you have in mind. Our pricing conditions show it for every financing line, and the calculator works it out again on your own figures.