Do you know what that APR figure means? A Peachy.co.uk survey has shown 27 per cent of people think the initialism described is a medical condition (guesses, please) while 7 per cent think it is a US president, perhaps sitting somewhere between FDR and JFK.
In fact, it stands for annual percentage rate. It includes the interest on the loan and importantly any arrangement fees or other charges, annualised against the original amount borrowed.
For the short-term lenders such as Peachy.co.uk and its rivals such as Provident Financial’s (PFG) Satsuma.co.uk, people are typically borrowing for much less than a year, so the APR is criticised as a misleadingly high figure.
But regulators defend it as an easy way for customers to compare on price, especially given consumer debt has become an important input of our economic recovery.
