Interest APR Calculator UK

APR Formula:

\[ APR = \frac{(Total\ Interest + Fees)}{P} \times \frac{365}{T} \times 100 \]

Total Interest (GBP):

GBP

Fees (GBP):

GBP

Principal (P, GBP):

GBP

Loan Term (T, days):

days

APR (%):

Unit Converter ▲

Unit Converter ▼

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1. What is APR?

APR (Annual Percentage Rate) represents the true cost of borrowing, including both interest and fees, expressed as an annualized percentage. It allows consumers to compare different credit products on a like-for-like basis.

2. How Does the Calculator Work?

The calculator uses the standard UK APR formula:

\[ APR = \frac{(Total\ Interest + Fees)}{P} \times \frac{365}{T} \times 100 \]

Where:

\( Total\ Interest \) — Total interest paid over the loan term (GBP)
\( Fees \) — Any additional fees charged (GBP)
\( P \) — Principal loan amount (GBP)
\( T \) — Loan term in days

Explanation: The formula calculates the annualized cost of borrowing as a percentage of the principal amount.

3. Importance of APR Calculation

Details: APR is a legal requirement for UK lenders to display, providing borrowers with a standardized way to compare credit products. It helps consumers understand the true cost of borrowing and make informed financial decisions.

4. Using the Calculator

Tips: Enter all amounts in GBP. Ensure the loan term is entered in days. All values must be positive numbers with principal greater than zero and term at least 1 day.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: Interest rate only shows the cost of borrowing the principal, while APR includes both interest and any additional fees, giving a more complete picture of the total cost.

Q2: Is APR the same for all types of credit?
A: While the calculation method is standardized, different credit products (credit cards, personal loans, mortgages) may have different fee structures that affect the APR.

Q3: Why is 365 used in the formula?
A: 365 represents the number of days in a year, converting the daily rate to an annual percentage rate.

Q4: What is a good APR rate?
A: Lower APR is generally better. Rates vary by credit product and borrower creditworthiness. Typically, rates below 10% are considered good for personal loans.

Q5: Are there any limitations to this calculation?
A: This provides a simplified calculation. Actual APR calculations by lenders may be more complex and consider compound interest and specific fee structures.