AER vs APR: the two interest rates explained simply
By SendPay Business · · 2 min read
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AER and APR are both yearly interest rates, but they are used for opposite things. AER tells you what you earn on savings. APR tells you what borrowing costs. Both exist so you can compare products on the same basis.
AER: for savings
AER stands for Annual Equivalent Rate. It shows what you would earn over a year once interest is added and then earns interest itself, known as compounding. It lets you compare a savings account that pays monthly with one that pays yearly.
APR: for borrowing
APR stands for Annual Percentage Rate. It shows the yearly cost of borrowing, including interest and most compulsory fees. In the UK, adverts for credit often show a representative APR, which at least 51% of successful applicants must be offered, so your own rate may be higher.
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Comparing savings
the higher the AER, the more you earn.
Comparing loans or credit cards
the lower the APR, the cheaper it is.
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Questions people ask
What is a flat rate as an APR?
Turn a loan's flat rate into its real APR.
Flat rate to APR calculator →What will a loan cost me each month?
Our free loan repayment calculator shows the monthly payment, the total repaid and the total interest from the amount, the APR and the term.
Loan repayment calculator →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.