APR (annual percentage rate)

APR stands for annual percentage rate. It expresses the total yearly cost of borrowing as a single percentage figure, bringing together the interest rate and any compulsory charges that form part of the credit agreement. Because it rolls these costs into one number, APR lets a borrower compare two facilities on a like-for-like basis rather than weighing an interest rate and a fee separately.

How APR is worked out

APR is calculated using a standard method set out in UK regulations. It takes the amount borrowed, the interest charged, any mandatory fees, and the timing of every payment, then converts the whole arrangement into one annualised rate. Two facilities can carry the same headline interest rate but different APRs if one charges arrangement fees and the other does not, or if repayments fall on a different schedule.

Representative APR

A "representative APR" is the rate that at least 51% of accepted borrowers are expected to receive or better. The rate offered to an individual business can differ from the representative figure, because pricing reflects the borrower's circumstances and the assessment of the application.

APR in business lending

Credicorp lends only to UK limited companies and limited liability partnerships, not to consumers. Business lending of this kind sits outside the consumer credit regime, so the disclosure rules that apply to personal loans are not all engaged. We still find APR a useful, plain figure for explaining the cost of a facility, and we show the rate and any fees clearly so a director can judge the total cost before committing.

Why it matters

A low advertised interest rate does not always mean a cheaper facility. Fees, the repayment term, and how often interest is applied all affect what a business actually pays. Reading the APR alongside the full schedule of charges is the most reliable way to understand the real cost of borrowing.