Used as a measure of the true interest payable on a loan or other finance over one year. As well as measuring the amount of interest charged, the APR figure includes most other additional costs involved. By identifying the true cost of borrowing, the APR provides the consumer with a method of directly comparing the true costs of different loans.
The Consumer Credit Act 1974 makes it a legal requirement for companies that advertise loans or credit cards to provide a true APR figure with any loan illustration. This enables borrowers to compare rates and to see the true rate of interest repayment they would incur over the full year.
