Representative APR explained

Applying for a loan or credit card can be confusing, especially if you don’t understand the terminology being used, which could result in being charged an unexpected interest rate. On this page, you’ll find out why the interest rate you receive could be different to the advertised rate, what representative APR is and what APR and APRC are.

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What is a representative APR?

When you take out a loan that’s advertised with a representative APR, it means that at least 51% of borrowers will receive a rate that’s the same as, or lower than, this advertised rate. However, there’s no guarantee that each of those 51% of customers will get the same rate. 

Put simply, representative APR (annual percentage rate) is a type of interest rate that explains the cost of borrowing money. Loans are usually ranked by their representative APR, which makes them easy to compare. 

The rundown
  • Representative APR refers to the rate of annual interest borrowers will pay on a loan 
  • The rate of APR you’re charged will depend on several factors, including your credit score
  • Your lender should make you aware of the representative APR when you take out a loan

Representative APR meaning

APR stands for annual percentage rate and is the official rate used to explain the cost of borrowing. It refers to the annual rate of interest that borrowers pay and investors receive. APR is typically shown as a percentage. This figure represents the actual annual cost for a loan or credit card over its full term. This annual cost to you becomes an annual income for the investors who provided the money you’re borrowing. 

Representative APR includes all compulsory fees, such as application or annual fees, and makes it easy for you to compare loans and credit cards.


Representative APR explained

Representative APR means that the lender only needs to offer the rate advertised on a loan or credit card to at least 51% of applicants. For example, you might see a loan offered at 5% representative APR, but only 51% of applicants will actually get that rate. The 51% of people offered the advertised APR only includes the people who accept the offer. It doesn’t include anyone whose application was rejected. The remaining 49% of applicants will probably be offered a higher APR.

The APR you get also depends on your individual financial circumstances and how closely you meet the lender’s eligibility criteria. This is called the personal APR and may be different from the representative APR.

What is a good APR?

A ‘good’ APR will usually depend on your personal financial circumstances and the amount you want to borrow. Credit card rates can vary, typically between 5% to 30% APR, with the final figure often based on your credit score. 

What is exact APR?

Exact APR means that the advertised APR is the rate you’ll get. So if you apply for a loan or credit card that has an exact APR of 6%, then you’ll get that rate. 

Being approved for a loan or credit card with exact APR is usually dependent on your personal finances and credit score. Exact APR can sometimes be higher than you would see with representative APR, but it is generally more accurate as there are no hidden charges, which means you’ll pay what you expect to pay. Choosing a credit card or loan that offers exact APR means you’ll know the exact amount you have to repay.

What is APRC?

APRC stands for annual percentage rate of change. Lenders are required to give you a quote, including the APRC when you apply for a loan or credit card. It’s a standard interest rate calculation designed to provide you with the total amount of interest you’ll pay throughout your loan or credit term. It should also include any extra charges you may have to pay to take out credit, including lender’s fees, valuations, and legal fees. The purpose of the APRC is to help you understand the true cost of what you’re borrowing.


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