The truth is that finding the best interest rate is not always as simple as looking for the lowest advertised number. In order to properly compare offers, you really need to look at the Annual Percentage Rate (APR).

## What is APR?

The total cost of borrowing can be expressed as APR (Annual Percentage Rate). APR reflects interest and all fees and the effects of any compounding.

This means that APR is always a higher percentage than your interest rate, because it includes all costs. It's not the monthly rate at which interest accrues on your loan.

We recommend using APR when comparing loan offers and costs from different lenders. Remember, any lender regulated in the UK or the US is required to provide you with APR.

## What is the interest rate?

The interest rate is the annual rate at which interest is calculated on your loan. APR is a rate that describes the total cost of borrowing, which is required for all lenders that are regulated by the FCA.

We use simple interest rates, meaning that interest does not compound throughout the life of the loan. The interest rate is variable, and is made up of two components:

- a fixed margin, determined by Prodigy Finance
- We use a 3-month benchmark as the variable base rate.