Loans and investments
Lesson 8 of 9
APR and the cost of borrowing
Objective. Interpret APR and compare loan offers.
The key idea
APR includes interest plus compulsory fees over a year, so it compares offers more fairly than a headline monthly rate.
Worked example
Borrow £2,000 over 2 years, repaying £95 a month. Total cost of credit?
- 1Total repaid: 95 × 24 = 2,280.
- 22,280 − 2,000 = 280.
Answer: £280
Practice
Each question comes with a picture and a listen button. Try it first, then reveal the answer.
Common mistake. Comparing a monthly rate with an APR as if they were the same thing.
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