1. What is APR?

APR (Annual Percentage Rate) represents the annual cost of borrowing money, including interest and fees. It provides a standardized way to compare different loan and credit products in the UK financial market.

2. How Does the Calculator Work?

The calculator uses the APR formula:

Where:

• \( Interest \) — Total interest paid (£)
• \( Principal \) — Original loan amount (£)
• \( Days \) — Loan duration in days
• \( 365 \) — Days in a year
• \( 100 \) — Conversion to percentage

Explanation: This formula calculates the annualized interest rate by scaling the interest paid over the loan period to a full year basis.

3. Importance of APR Calculation

Details: APR is crucial for comparing loan offers, understanding the true cost of borrowing, and making informed financial decisions. UK regulations require lenders to display APR prominently.

4. Using the Calculator

Tips: Enter the interest amount in pounds, principal amount in pounds, and loan duration in days. All values must be positive numbers with principal and days greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: APR includes both interest and any additional fees, providing a more comprehensive view of borrowing costs than the basic interest rate alone.

Q2: What is a typical APR range in the UK?
A: APRs vary widely by product type: credit cards (15-25%), personal loans (3-15%), mortgages (2-6%), with higher rates for riskier borrowers.

Q3: Why is APR important for UK consumers?
A: The Financial Conduct Authority (FCA) requires APR disclosure to ensure transparency and help consumers compare financial products fairly.

Q4: Does APR include all costs?
A: In the UK, APR must include most mandatory fees but may exclude optional insurance or penalty charges. Always check the full terms.

Q5: How often does APR compound?
A: This calculator assumes simple interest. Actual APRs may compound daily, monthly, or annually depending on the product terms.