Total cost vs APR
Lesson 2 of 12 in our free Borrowing guide: a 5-minute money game with the key points below.
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Questions you'll answer
Mo borrows £1,000 and repays £95 a month for 12 months. What's the total cost of the credit (the extra on top of £1,000)?
An advert shows a 'representative APR'. What does that actually mean?
Quick facts
- Myth: “A lower monthly payment always means a cheaper loan.” — Stretching a loan over longer can shrink payments but INCREASE the total you repay.
- Fact: “Lenders must show you the total amount repayable before you sign.” — It's in the pre-contract info. Read it before you agree.
- Fact: “A 0% deal can still cost you if you miss a payment or the offer ends.” — Late fees and a rate jump after the 0% period are common catches.