Comparing APRs

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APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers.

All lenders have to tell you what their APR is before you sign an agreement. It will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around. Don't forget that sometimes bank loans are cheaper than the credit schemes offered by stores.

If you find a deal with a low APR, ask the following questions:

• Do the charges included in the APR vary, or is the rate fixed?
  If the charges are variable, your repayments could go up or go down. If the rate is fixed, your repayments will stay the same.
  
  
• Are there any charges that are not included in the APR?
  This could include something like optional payment protection insurance. If so, make sure you understand what they are and when you would have to pay them.
  
  
• What are the conditions of the loan or credit and do they suit you?
  For example, do you have a choice about how and where you make the repayments? If you suddenly have spare money, can you pay the loan off early, without penalties? Read the agreement carefully - once you have signed it you are legally bound by its terms.