APR Calculator UK

Calculate Annual Percentage Rate for loans, credit cards and mortgages. Convert between monthly rates and APR, or find the APR on any loan using the true IRR method. All calculations follow FCA-compliant methodology.

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Monthly Interest Rate (%) Enter the monthly rate shown on your credit card or loan statement.

What Is APR? Annual Percentage Rate Explained

APR stands for Annual Percentage Rate. It is the single most important number when comparing the cost of any credit product in the United Kingdom. Unlike a plain interest rate, APR captures the full yearly cost of borrowing, expressed as a percentage of the outstanding balance.

APR was introduced under the Consumer Credit Act 1974 and is now governed by the Financial Conduct Authority (FCA). Every UK lender offering personal loans, credit cards, mortgages, overdrafts or hire purchase agreements is legally required to display the APR prominently in all advertising and at the point of sale. This makes it possible to compare a personal loan from your bank with a credit union offer or an online lender on an equal footing.

Converting Monthly Rate to APR

APR = (1 + monthly rate)^12 - 1

Example: 1.5% monthly rate → APR = (1.015)^12 - 1 = 19.56%

APR vs Interest Rate: Why They Differ

Many borrowers confuse the stated interest rate with the APR, and lenders sometimes exploit this confusion in their marketing. The interest rate (also called the nominal rate) only reflects the cost of borrowing the principal each year. APR goes further by incorporating all compulsory charges that are a condition of the loan.

Consider a £10,000 personal loan at 8% interest per year with a £250 arrangement fee. The stated interest rate is 8%, but because the fee effectively adds to your borrowing cost, the APR will be higher, often 9.5-11% depending on the loan term. Over a 3-year term, that arrangement fee can add hundreds of pounds to what you actually pay.

Feature	Interest Rate	APR
Includes interest	Yes	Yes
Includes arrangement fees	No	Yes
Includes broker fees	No	Yes
Useful for comparison	Limited	Yes
Required by FCA	No	Yes

APR vs EAR: Understanding the Difference

EAR (Effective Annual Rate) is the rate that takes into account compounding. When interest is charged monthly (as most loans are), the actual annual cost is slightly higher than the stated annual rate due to interest-on-interest. EAR and APR are often the same number for a straightforward loan with no fees, because both account for compounding on a 12-month basis.

The key difference arises with products like overdrafts. Since the FCA's 2020 overdraft reforms, banks must quote an EAR for overdrafts rather than daily fees. For a simple loan with no additional fees, EAR and APR will be identical. When fees are present, APR will be higher than the nominal annual rate but EAR will equal the APR only if fees are excluded.

Quick rule of thumb: For comparing loans: use APR. For comparing savings accounts: use AER (Annual Equivalent Rate). For comparing overdrafts: EAR is now standard in the UK following FCA rules.

UK FCA Requirement: APR Disclosure Rules

The FCA's Consumer Credit sourcebook (CONC) mandates that any advertisement for a financial product involving credit must display the representative APR in a prominent manner. The legal basis stems from the Consumer Credit Act 1974, as amended by the Consumer Credit (EU Directive) Regulations 2010 which implemented the EU Consumer Credit Directive.

Key rules include: APR must be displayed at least as prominently as any other interest rate mentioned; it must be accompanied by a representative example showing the loan amount, term, monthly payment, total repayable and the APR; and the rate must be calculated using a standardised formula prescribed by law.

Representative APR: What "51% of Customers" Means

When you see "19.9% APR representative" in a loan or credit card advertisement, the word "representative" carries legal weight. It means that at least 51% of customers who successfully apply for that product must receive that APR or a lower one. The other 49% may be offered a higher rate based on their credit profile.

This is why you may apply for a loan advertised at 6.9% APR and be offered 14.9% APR. Your actual rate depends on your credit score, income, existing debts and the lender's internal risk models. This is also why it is important to use eligibility checkers (which perform soft credit searches) before making formal applications, as hard searches can temporarily lower your credit score.

How to Compare Loan APRs Effectively

When comparing loans, always use APR as the primary metric, but do not stop there. Also consider:

Total amount repayable: This is the single most honest figure. It tells you exactly how much you will pay in total.
Early repayment charges: Some lenders charge up to 2 months' interest if you pay off your loan early. This is not always reflected in the advertised APR.
Payment holiday availability: Some lenders allow payment breaks, which can be valuable but may increase the total cost.
Flexible overpayments: Check whether you can make overpayments without penalty to reduce the total interest paid.

APR for Credit Cards: A Different Calculation

Credit card APR works differently from loan APR in practice. Most credit cards charge interest on the daily outstanding balance, and the monthly interest is calculated as: daily balance x (APR / 365). If you always pay in full each month, you typically pay no interest at all.

The complication is that credit cards often have different APRs for different transaction types: purchases may be 22.9% APR, cash withdrawals 39.9% APR, and balance transfers 0% for a promotional period then reverting to 22.9%. Always check which rate applies to each type of spend.

Payday Loan APR: Why It Exceeds 1,000%

Payday loans are a stark example of APR arithmetic. A typical payday lender might charge £24 per £100 borrowed for a 30-day loan. That seems modest until you annualise it. Using the standard APR formula: monthly rate = 24%, APR = (1.24)^12 - 1 = approximately 1,355%. This is not a trick: it genuinely represents the cost if the loan were rolled over for a full year.

The FCA capped payday loan costs in January 2015. The cap means: interest and fees cannot exceed 0.8% per day of the outstanding balance; a borrower will never repay more than twice what they borrowed; and default charges cannot exceed £15. Despite these caps, payday loans remain extremely expensive and should only be used as a last resort.

Mortgage APR vs Rate: LTV and Fees

Mortgage APR is calculated in the same way as loan APR but the inputs are more complex. A mortgage with a 4.5% fixed rate for 2 years may have an APR of 5.8% once you factor in:

Arrangement fee (£999 - £1,999 is common)
Valuation fee (£150 - £1,500)
Legal fees covered by the lender
The reversion rate (the SVR you move to after the fixed period)

The SVR (Standard Variable Rate) assumption is why mortgage APR can look misleadingly high or low: it assumes you stay on the SVR for the remaining mortgage term, which most borrowers do not.

Car Finance APR: PCP vs HP

Personal Contract Purchase (PCP) and Hire Purchase (HP) both have APRs, but they are not directly comparable to personal loan APRs because the loan structure differs. With PCP, you are financing the depreciation of the vehicle plus a guaranteed minimum future value (GMFV), not the full purchase price. This means the actual amount of credit is lower, and a 9.9% PCP APR may be more or less expensive than a 9.9% personal loan APR depending on the deal structure.

Calculating APR in Excel

Excel's RATE function returns the periodic rate, not APR. The formula =RATE(nper, -pmt, pv) * 12 gives the nominal annual rate, which is not the same as APR. To get the APR in Excel: =((1+RATE(nper,-pmt,pv))^12)-1. Alternatively, use the XIRR function with a series of cash flows: the initial loan disbursement as a positive value and each monthly payment as negative values.

Credit Score Impact on APR Offered

Your credit score is the single biggest determinant of the APR you are offered. Lenders in the UK use proprietary scoring models based on data from the three main credit reference agencies: Experian, Equifax and TransUnion. A very good Experian score (881-960) may qualify you for rates of 5.9-8.9% APR on a personal loan. A fair score (721-880) might result in 10-20% APR. A poor score (below 720) may see you offered 30-50% APR or declined entirely.

Tip: Check your credit report at all three agencies before applying for significant credit. Errors on your file are more common than you might expect and can cost you thousands of pounds in higher interest rates.

Worked Examples

Example 1: Personal Loan

You borrow £8,000 at a stated rate of 6.9% per year for 3 years (36 months) with a £150 arrangement fee. Monthly payment: £249.04. Total repaid: £249.04 x 36 = £8,965.44. Total interest: £965.44. Add arrangement fee: £1,115.44. APR calculated using IRR on actual cash flows: approximately 9.7%.

Example 2: Credit Card

Your credit card charges 1.74% per month. APR = (1.0174)^12 - 1 = 22.98%. If you carry a balance of £2,000 for 12 months making only minimum payments, the total interest at this APR would be approximately £460.

Example 3: Mortgage

A £200,000 mortgage at 4.89% fixed for 5 years, arrangement fee £999, valuation £300, SVR 7.49% assumed for remaining 20 years. The APRC (Annual Percentage Rate of Charge, used for mortgages) works out at approximately 6.1% when the SVR period is included in the calculation.

Frequently Asked Questions

What is APR and how is it calculated?

APR stands for Annual Percentage Rate. It is the yearly cost of a loan expressed as a percentage, including both the interest rate and mandatory fees. For a simple loan, APR is calculated by converting the monthly rate: APR = (1 + monthly rate)^12 - 1. For loans with fees, those fees are added to the total cost before the rate is calculated. The FCA requires all UK lenders to quote APR so consumers can make fair comparisons.

What is the difference between APR and interest rate?

The interest rate (or nominal rate) is simply the cost of borrowing the principal, expressed as a percentage per year. APR is broader: it includes the interest rate plus compulsory fees such as arrangement fees, broker fees, and annual charges. This means APR is always equal to or higher than the stated interest rate. Comparing APRs gives you a true like-for-like cost of different loan products.

What is a good APR on a personal loan in the UK?

As of 2025, the best personal loan APRs in the UK typically range from 5.9% to 9.9% for borrowers with excellent credit taking loans of £7,500 to £25,000. For smaller loans (under £3,000), APRs tend to be higher, often 20-40%. The average APR on a personal loan in the UK is around 11-15%. Payday loans and buy-now-pay-later products can carry APRs of 1,000% or more.

How does representative APR work?

Representative APR is the rate that at least 51% of successful applicants must receive. Lenders are required by the FCA to advertise a representative APR, but the actual rate you are offered may be higher depending on your credit score, income, and loan amount. If you see "10.9% APR representative", it means more than half of accepted customers get that rate or better, but up to 49% may be offered a higher rate.

Why is credit card APR so high compared to personal loans?

Credit card APRs in the UK typically range from 20% to 40%, much higher than personal loans, for several reasons. Credit cards are unsecured revolving credit with no fixed repayment schedule, making them higher risk for lenders. They also offer flexibility including 0% promotional periods, purchase protection, and rewards, the cost of which is factored into the ongoing rate. The average credit card APR in the UK is around 33% as of 2025.

How do I calculate the true cost of a loan using APR?

To calculate the true cost: 1) Find the monthly payment using the loan formula: PMT = PV x r / (1 - (1+r)^-n), where r is the monthly rate and n is the number of months. 2) Multiply monthly payment by the number of months to get total repaid. 3) Subtract the original loan amount to get total interest paid. 4) Add any upfront fees. Our APR calculator above does all of this automatically when you enter loan amount, monthly payment, and term.

Mustafa Bilgic

UK Finance Specialist at UK Calculator. Mustafa writes about loans, credit and FCA-regulated financial products, helping UK consumers understand the true cost of borrowing.