Calculate Annual Percentage Rate from interest and fees.

Why APR matters more than the advertised rate

Walk into any lender with a "3.9% loan" headline and the APR on the same product is often 5.5% or higher. The gap is where the cost hides — arrangement fees, broker fees, documentation charges, and sometimes mandatory insurance. APR (Annual Percentage Rate) is the standardised comparison number that includes all of it. Under Consumer Credit Regulations, lenders must quote APR in credit advertisements, which is why you see it everywhere. Using APR rather than headline rate is the single most reliable way to compare borrowing costs across different lenders.

What APR actually includes

The APR formula combines the interest rate with any compulsory fees spread across the life of the loan, expressed as an annual equivalent rate. A 10,000 loan at 6% interest with a 400 arrangement fee over 3 years has an APR of roughly 8.5% — meaningfully higher than the headline rate. The fee's impact on APR depends on term length: spread across 3 years it adds ~2.5%, across 5 years ~1.5%. This is why short-term loans with the same fee appear to have dramatically higher APRs — the fee is amortised faster. It's not a different cost structure; it's the same cost, just expressed as an annual rate on a shorter base.

Representative APR vs personal APR

Lenders advertise "Representative APR" which must be offered to at least 51% of accepted applicants. The other 49% can be offered higher rates. If you have borderline credit, the rate you're actually offered may be meaningfully above the representative figure. Before committing to an application that will generate a hard credit check, many lenders now offer "soft search" eligibility checking that returns a personalised APR without affecting your credit file. Using these tools first avoids the credit-file damage of applying to lenders who'll only offer you rates above what you'd accept.

APR vs EAR vs AER

Three different rates for three different things:

APR: for borrowing — includes compulsory fees.

AER (Annual Equivalent Rate): for savings — shows the effective annual rate including compounding frequency.

EAR (Effective Annual Rate): for overdrafts — similar to APR but specific to overdraft structure.

Most confusion happens between APR and AER. A savings account at "4.5% AER" and a loan at "4.5% APR" are not equivalent numbers — the loan APR includes fees while the savings AER includes compounding benefit. Always compare like for like: APR vs APR for loans, AER vs AER for savings.

The APR variation that matters most: credit cards

Credit card APRs work differently. They're quoted as the cost of purchases after an interest-free period, but the real cost depends heavily on whether you clear the balance monthly. A 22% APR card used transactionally (balance cleared each month before the interest-free period ends) costs 0% in interest. Used as a revolving credit facility (balance carried forward), the 22% is the actual cost. The headline APR assumes the revolving-credit case. If you're a transactor — clearing monthly — the APR is almost irrelevant; what matters is rewards, insurance, and section 75 protections. If you carry a balance, the APR is the dominant cost and the card choice should minimise it.

Fixed vs variable APR

Fixed APR means the rate is locked for the term of the loan. Variable APR typically moves with the the central bank base rate or the lender's standard variable rate. In a falling-rate environment, variable costs less over time; in a rising one, it costs more. For planning purposes, fixed removes a source of uncertainty. For cost-minimisation in stable or falling-rate periods, variable sometimes wins. Most personal loans and mortgages are fixed for an initial term then variable thereafter — the combination means you get certainty early and exposure to future rate movements later.

The APR that should concern you

As a rough guide for consumer borrowing: under 6% is good (mortgages and secured lending); 6–10% is typical for strong-credit personal loans; 10–20% is common for subprime personal loans and lower-tier credit cards; 20–30% is standard credit card rates; 30–40% is store cards and weak-credit personal loans; 40%+ is expensive short-term lending; 100%+ signals payday-adjacent products (capped at 0.8% per day / 292% APR since 2015). Knowing where your quoted APR sits on this scale tells you quickly whether you're looking at a reasonable product or an expensive one.

The APR trap that's not a trap

Short-term bridging loans sometimes quote APRs of 15–25%, which sounds expensive compared to mortgages. But bridging loans are structured for 3–12 month terms, and the APR annualises their short-term cost. In absolute terms, a 100,000 bridging loan at 18% APR for 6 months costs ~9,000 — not nothing, but manageable for the specific purpose (closing a property purchase before selling the existing one). The high APR looks alarming but reflects the annualisation of a short-duration cost, not the actual cost of the specific use case. Comparing bridging APRs against 25-year mortgage APRs is apples and oranges.

When APR is less useful

APR assumes you'll hold the loan for the full term and pay as scheduled. It doesn't perfectly handle early repayment scenarios, loans where rates vary during the term (most mortgages reset after the fixed period), or products with complex fee structures. For detailed comparison of multi-decade mortgages with different fixed periods, total cost over the planned holding horizon is a more useful measure than APR alone. APR gives you the honest headline number; specific-scenario analysis still requires the full calculation.

What this calculator shows

The tool takes the interest rate, any arrangement fees, and the loan term to produce the APR figure. It doesn't model compound credit card behaviour, variable rate projections, or early-repayment scenarios. Use the result as the honest rate for comparing lenders with similar structures. For fundamentally different product types (fixed vs variable, secured vs unsecured, short-term vs long-term), APR gets you started; individual product terms decide the final answer.