This is where measures such as the annual equivalent rates (AER) and annual percentage rate (APR) come in handy. These are calculated in the same way across providers. If you are trying to compare accounts, look for these, rather than the headline rate.
Annual percentage rate (APR)
An APR is used as a measure of how much it costs to borrow money and is quoted by mortgage lenders and companies offering personal loans and credit cards. The APR includes any upfront fees charged by the lender, spread over the period for which you are borrowing the money.
The APR tells you how much your borrowing will cost over the course of a year, as a proportion of the amount you have borrowed. So if you are borrowing 100 at an APR of 9%, you will pay 9 in interest and charges over the first year.
Mortgage lenders will advertise a headline rate and an APR. Photograph: Linda Nylind In a loan advert, the provider will often quote a typical APR – this is because many lenders set the actual interest rate charged according to the borrowers credit record and personal circumstances. A bank has to have offered its typical APR (or a better rate) to at least 66% of...
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