What is representative APR?
Flummoxed by APR? Find out what you need to know here...
Introduced in February 2011 to increase the transparency of loan, mortgage and credit card agreements, the consumer credit legislation now requires lenders to display representative APR (annual percentage rate).
The introduction of such a ruling is designed to benefit the everyday consumer and to assist in the decision-making process when borrowing.
APR is the percentage of interest that is to be added on to a loan, mortgage or credit card agreement. However, representative APR is different from the more widely-known term of typical APR.
Representative APR requires companies to display how exactly the relevant interest rate is applied to the loan, to clearly state any other applicable fees that could be associated with the credit and the cost of any compulsory add-on services or products.
Furthermore, representative APR must reflect at least 51% of the expected return from the advertisement in question. Responsible short-term lenders – such as Ferratum – are also under compliance to promote the representative APR in a prominent fashion in their adverts so it is straightforward for consumers to compare rates with other lenders.
Ferratum, as part of our commitment as a reliable and trustworthy lender, is fully supportive of the initiative to highlight representative APR which is now part of UK legislation.