As has already been mentioned, the key idea behind introducing a representative APR is to encourage improved transparency within the loan industry. So rather than simply having an Annual Percentage Rate and hiding away other fees somewhere in the small print, this representative figure encompasses all costs. It also represents the majority of all customers (51%+) so that you can easily work out repayment costs.Therefore the representative APR is the percentage you'll pay over the course of a year on top of the amount borrowed. In the case of a personal loan this will often remain around the same, with most banks generally incorporating fees into the interest (or not having them at all). However, for lenders at the other end of the scale, who offer loans to those with poor credit ratings at a higher cost, representative APR is likely to have a far larger impact.

 

Therefore the representative APR is the percentage you'll pay over the course of a year on top of the amount borrowed.