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What Is a Good Representative APR: 2022’s Thorough Guide

Written by, Marija Petkova

Updated April, 17, 2022

You’ve decided to apply for a loan or a credit card, but you are baffled by the terminology, such as what is a representative APR and how to compare the various loan products?

You’re in luck, as this guide will answer that question and tell you what is a good representative APR in the UK, so you know when you’re getting an excellent deal.

Let’s get to it!

What Is a Representative APR?

The term representative APR can be explained in a few words: the Annual Percentage Rate (APR) is a type of marketing interest rate that lending institutions are required to publish to explain the current cost of borrowing money and to compare their products.

When financial establishments advertise their loans and credit cards with a ‘representative APR’, they are essentially saying that at least 51% of their applicants will receive the same or lower rate than the representative APR. The remainder will likely receive higher APRs.

However, the personal APR that individual borrowers get varies based on factors such as their income, employment status, credit history, and more.

What Is a Good APR?

Now that you understand the representative APR meaning let’s look at what makes a good APR, so you know how to compare the various lending products.

The general rule is the more you borrow, the lower the APR will most likely be. However, with good enough credit scores, you can get bigger loans at low APRs, and you can find out all about your personal rating by contacting UK’s credit score agencies.

However, while the representative APR for a credit card takes the meaning of the average Equifax, Experian, and TransUnion scores into consideration, the actual rates will still vary between 5% and 30% due to the specific financial circumstances of each applicant.

To stay closer to the one-digit APRs, you have to reassure the various lending institutions that you can repay the loan or your credit card purchases on time by showing them a good credit history, meaningful employment, and a sufficient salary.

Note: You may also be offered loans and credit cards with 0% APRs; however, these promotions are only available during a limited period and include several requirements, such as paying a steady sum on time to avoid being demoted to a standard variable rate.

Representative APR Examples

When providing their representative APR example lists, lending institutions must abide by certain regulations, and we look at and compare several such estimates below:

Loan amountLoan durationRepresentative APRInterest rateMonthly payment amountTotal repaid amount
A4£2,0003 years13.4% fixed13.4%£67.04£2,413.44
AIB£2,0003 years12.3% fixed11.75%£66.36£2,388.96
Cahoot£1,5003 years13.5%13.5%£50.35£1,812.60
JN Bank£2,5003 years9.9% fixed9.9%£80.06£2,882.16
Novuna Personal Finance£2,5003 years9.8% fixed9.8%£79.95£2,878.20

Note: When comparing the representative APR vs the interest rate, you should remember that the representative APR is always higher as it includes additional compulsory charges, such as application and closing fees, on top of the basic annual loan cost.

Representative APR for Credit Cards

Since credit cards can be used in various ways, lending institutions always consider the most common card spending method (standard purchases) to calculate the card’s APR.

Moreover, these rates are based on a spending limit of £1,200 that can be repaid regularly over a year. The following table includes two APR examples with and without an annual fee:

Example 1Example 2
Purchase rate21.9%18.9%
Annual fee£0£195
Credit limit£1,200£1.200
Representative APR21.9%59.3%

As evident from the table, the first example is the better credit card choice as it only includes a 21.9% purchase rate (the same as the representative APR); on the other hand, the second card comes with an exaggerated APR of close to 60% as it incorporates a £195 annual fee.

Note: Credit card APR estimates do not consider fees for alternative transactions such as late payments, balance transfers, withdrawals, etc. Moreover, you should also learn what happens when you can’t pay your credit card debt in the UK, as it might impact your card choice.

So What Is This Other APR Term?

While learning what is a representative APR is important, let’s also look at other related terms that might be confusing to first-time loan applicants:

  • Exact APR—when a lending institution markets its APR as ‘Exact APR’, you’ll be getting the advertised rate regardless of your financial circumstances, which will only matter in whether or not you get approved for the loan or the credit card;
  • Personal APR—this is the actual rate that you will be offered after the bank reviews your financial history and current employment situation; while it will most likely be higher than the representative APR, you might also be offered lower rates.
  • APRC—the annual percentage rate of charge is very similar to APR, but it is the preferred term to compare secured loans and mortgages, and when applying for one of these products, you won’t be offered a different APRC based on your credit score.

Note: If you need a loan, first visit institutions that can give you a personal rate even before you apply so you can compare their offers and get the one that meets your financial goals. In any case, you can always read more about UK’s personal loan statistics here.

Before Getting That Loan

After learning what is a representative APR with the help of this brief guide, you are equipped to recognise a good offer when you see one. Just remember to consider the products of several lenders and inquire about any additional charges that might apply under your circumstances.

Frequently Asked Questions And Their Answers

What does representative APR mean?

The representative APR is the annual percentage rate that the majority of customers are offered when they are approved for a loan or a credit card.

How is representative APR calculated?

Lenders calculate their representative APR ranges based on the average rates offered by the market at that moment and whether or not they include additional loan fees.

What is a good representative APR?

A good representative APR is one that is lower than the average APR for the same type of loan.

My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.