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APR stands for ‘annual percentage rate’ and is a figure expressed
as a percentage that represents the true rate of interest, and is inclusive of
any additional fees that might be imposed by the lender, such as arrangement charges.
There are statutory regulations that determine the way in which APR must be calculated,
so it is a useful yardstick with which to compare personal loans.
APR can be charged in one of two ways; it can be either variable or fixed.
Fixed rates are usually higher than variable rates at the outset but they offer
the borrower the peace of mind that the rate will not change throughout the term
of the loan. Variable rates, on the other hand, will fluctuate in accordance with
the Bank of England base rate. It is worth bearing in mind that interest rates
can fall as well as rise, and that variable rates can help you to benefit from
any advantageous economic changes.
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