Let's be real, finance can be confusing. Whether it's APR, interest rates, or the finer details, sometimes it's hard to work out what things mean and why they are important.

At V12, we believe finance should be simple and transparent.

In this blog, we'll break down what APR is to help you make confident decisions when applying for finance.

Whatever you use finance for, whether it's planning a holiday, buying a car, covering emergency costs, upgrading your home, or making a purchase, understanding APR is key to borrowing smart.

What is APR?

APR stands for Annual Percentage Rate. It's a simple way to understand the true cost of borrowing money over a year.

So, let's use an example, if a loan has an APR of 10%, that means over a year, you'll pay roughly 10% of the amount you borrowed in total costs (interest + fees).

It's shown upfront to help you see what you'll actually pay, not just the interest rate.

Key features of APR

APR is designed to help you compare finance fairly. A lower APR typically means a cheaper loan, but it's important to consider the whole picture based on what's important to you, including repayment terms and flexibility.

APR:
Shows the true cost of borrowing
Includes interest and fees
Helps you compare loan offers
Is expressed as a percentage

How is APR calculated?

APR is calculated using the interest rate, loan amount, loan term, and any compulsory fees.

It doesn't include optional extras like payment protection insurance, so always check what's included.

Why is APR important when choosing a loan?

APR is one of the things that helps you compare. Different APR rates allow you to see which offer might be cheaper overall in the long run for you.

It's a legal requirement for lenders to show the representative APR, which is the rate offered to at least 51% of successful applicants.

But remember, your personal APR will vary depending on your individual circumstances, and things like your credit score, income, and financial history.

What is representative APR?

Representative APR is the advertised rate that most loan applicants will receive.

It gives you a general idea of what to expect, but it's not guaranteed. Your actual APR could be higher or lower depending on your circumstances, such as your financial history. 

Before applying before a loan 

APR is important, but it's vital you incorporate all factors for any borrowing before you decide to go ahead.

It's important to consider things like:

Monthly repayments and how much you can afford
Loan term length (how long you'll make repayments for)
Any risk associated with the loan (these should be clearly laid out for you)
Early repayment options and charges if there are any
Taking out a loan means committing to regular repayments over a set period and missing those payments can negatively impact your credit score, result in additional fees, and make future borrowing more difficult.

Everyone is different, so be sure to research whether finance is right for you before committing.  

At V12, we offer tools like our personal loan calculator and our personal loan eligibility check  to help you explore your options with no impact on your credit score.

How V12 Retail Finance and V12 Personal Finance can help

At V12, we specialise in helping people find finance that fits. Whether it's finance for a purchase through one of our partnered retailers or a personal loan through our trusted panel of lenders or brokers - what we aim to offer you is simple, straightforward and transparent.

Soft credit checks: for our personal loan eligibility check, you'll be able to check your eligibility without affecting your score*

Fast decisions: get unsecured loan options made for you in minutes
Different repayment terms: Find finance that works for you

We believe borrowing should be empowering, not intimidating. We'll always aim to offer clarity and confidence.

Ready to join the V12 Revolution?

Read more about the types of V12 Retail Finance we offer and where here  

Looking for a personal loan? Use V12 Personal Finance to check your loan eligibility. 

FAQS

1. What does APR stand for?
APR stands for Annual Percentage Rate. It reflects the total cost of borrowing over a year, including interest and standard fees.

2. Is a lower APR always better?
Generally, yes. A lower APR means you'll pay less over the life of the loan. But always check the full terms, including repayment details and any hidden charges.

3. What is the difference between interest rate and APR?
The interest rate is the cost of borrowing money. APR includes the interest rate plus any standard fees, giving you a more complete view of the loan cost.

4. Why is my personal APR different from the advertised rate?
The advertised rate is the representative APR, offered to at least 51% of applicants. Your actual APR depends on your credit score, income and financial history.

5. Can I check my loan eligibility without affecting my credit score?
Yes. *V12 Personal Finance offers a soft credit check through our eligibility checker, so you can explore your options safely. 

6. Does APR include all loan fees?
APR includes standard fees but not optional extras like insurance. Always read the loan terms carefully to understand what's included.

Representative example: If you borrow £5,500 over 5 Years at a Representative APR of 21.9% and an annual interest rate of 21.9% (fixed) you would pay £152.59 per month. Total amount repayable £9,155.49. Minimum repayment period is 12 months. Total charge for credit will be £3,655.49. 

Credit is subject to status, the % APR rate you will be offered is dependent on your personal circumstances.

It's important to carefully consider the type of loan that best suits your needs as well as a term and amount that is suitable and affordable.
 
V12 Retail Finance Limited is registered in England and Wales 4585692. Authorised and regulated by the Financial Conduct Authority. Registration number: 679653. Registered office: Yorke House, Arleston Way, Solihull, B90 4LH Correspondence address: 25-26 Neptune Court, Vanguard Way, Cardiff, CF24 5PJ. V12 Personal Finance is a trading name of V12 Retail Finance Limited.

V12 Personal Finance is a credit broker, not a lender. V12 Personal Finance introduces you to a limited range of brokers or lenders who may offer you a loan. V12 Personal Finance does not work with the whole of the lending market, meaning other loans may be available to you elsewhere.

V12 Personal Finance does not give you any recommendation or advice. V12 Personal Finance acts for itself and is not impartial. It does not act for you or for the lenders or brokers it works with.

V12 Personal Finance receives a fixed or percentage commission payment from the lender or broker if you take out a loan. The commission it receives varies depending on the product, loan amount or APR. Loan offers (if available) are shown in this order: unsecured loans followed by secured loans, ranked by the closest matched loan amount, term and lowest APR respectively. Before completing your application, you will be shown the commission arrangement between V12 Personal Finance and the lender or broker you have selected.

Credit is subject to status. You must be UK resident aged 18 and over, with a regular provable income. If you are a homeowner, V12 Personal Finance may provide you with details of loans secured against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

To make things easier, we'll share the information (including your personal details) that you confirm and provided during this eligibility check with our panel of lenders or brokers. We do this so that they can provide you with a quote for the loan you have requested and to save you from having to tell them again. Details of our panel can be found here.

You can read more about how we use your personal data in our privacy statement.

Warning: late payment can cause serious money problems.

For help, go to moneyhelper.org.uk