APR, AER and EAR Whats do they mean?

Do you look at the advertisements for loans and savings and wonder (insurance) what APR, AER and EAR mean? Well youre not alone. Even bank staff can get confused!

(Cheap mortgage)

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APR is short for "annual percentage rate" and describes ( remortgages ) the true cost of the money you borrow on loans, mortgages and credit cards. The exact calculation for APR takes into account the interest rate, when the interest is charged (daily, weekly, monthly or annually), all up front fees plus any other costs. The precise mathematics behind the calculation are specified and policed by the Financial Services Authority and all financial institutions have to adhere to it. There are no exclusions! The APR therefore enables you to make direct cost comparisons between the lenders who are offering you ( travel insurance ) money. (life assurance)

So if one lender is offering you a mortgage at 4.8% plus an arrangement fee of £600 and another is offering you an interest rate of 5.2% with a £150 fee, ( unsecured loans ) then the APR calculation will show you which of the two mortgages is the cheaper.

When you see the expression X% APR variable , this ( cheap loans ) means that the cost is currently X% but the interest rate is not fixed and can vary. (life insurance)

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