What is APR?

APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers. The APR includes important factors such as: 

  • the interest rate you must pay;   
  • how you repay the loan; the length of the loan agreement (or term); frequency and timing of instalment payments; and amount of each payment;   
  • certain fees associated with the loan; and   
  • premiums for payment protection insurance that the lender chooses to make compulsory.   

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. 

Example 1:  

If you borrow £1,000 for one year at 20% interest, and at the end of the year you repay a lump sum of £1,200: 

  • you will be paying an interest rate of 20%; and   
  • the APR will also be 20%.   

Example 2:  

If you borrow £1,000 for one year at 20% interest, and pay throughout the year in equal monthly instalments (12 x £100 = £1,200), 

  • you will still be paying an interest rate of 20%; but   
  • the APR, however, will be roughly 40%.  

Example 2 is more expensive because you are paying back the £1,000 gradually throughout the year. In Example 1 you have the benefit of being able to access the £1,200 for the whole year, which you could invest and earn interest on. By paying in instalments you're losing out; this increases the cost of the loan - hence the higher APR. 

Questions to ask the lender

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

  • Does the interest included in the APR vary, or is the rate fixed?
    If the rate is 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 charges for services such as optional payment protection insurance. If so, make sure you understand: 
    • what the charges are;   
    • whether you really need the services offered;   
    • how much you would have to pay; and   
    • when you would have to pay.   
  • 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?
  • Can you afford the monthly payments?
    A more expensive loan (with a higher APR) could have lower monthly payments if they are spread out over a longer period of time. That might suit you better if your budget is tight, even though you would pay more in the long run. 

What does Kilrea & District No.5 Credit Union Ltd offer you, the member? 

  • Our APR is 12.68%.   
  • There are no hidden charges with our APR  
  • Our loans can be paid directly over the counter or via a Standing Order arrangement with your bank. We never charge any fee for early payment of a loan, but the borrower saves on interest charges.  
  • Our APR is 12.68% which is equivalent to about £64 on a £1000 loan paid over a period of 1 year. 
  • Suitable monthly/weekly payments are agreed at the outset so that the loan is comfortably re-payable. Any member getting into difficulties is advised to discuss the matter with the CU loans officer to organise a re-structured arrangement. This is good for the member’s state of mind and helps the Credit Union plan for the future.   


Ayn Rand

Money is the barometer of society’s virtue.

 A creative man is motivated by his desire to achieve,

not by his desire to beat others…..