Frequently
asked questions...
• What is interest?
• What is APR?
• What is fixed-rate interest?
• What is variable-rate interest?
• What is the base rate?
 Q What is Interest?
A Interest is a fixed amount
added to a debt, often a percentage of the debt’s
total. This is considered the cost of the debt to the borrower Q What is APR?
A APR (Annual Percentage Rate) is
basically an estimate of how much interest you will need
to pay on your loan
every year.
How much total interest you will actually end up paying
for the duration of the loan depends on how the interest
rate changes
over time. Q What is fixed rate interest?
A Depending on the
lender, you may arrange for a loan with fixed rate interest,
meaning that you are only charged
a certain
rate for the duration of your loan. In other words,
if you borrowed £1,000 at 5% fixed rate, you would
need to pay back £1,000 plus an additional 5%,
or £50. Q What is variable rate interest?
A For loans arranged
with variable interest rates, the rates are usually linked
to the Bank of England base
rate and
the amount of interest charged will change over time,
according to adjustments in the base rate. Q What is the
base rate?
A The base rate is the rate of interest set
by the Bank of England, This is the amount of interest
charged by the
Bank of England
to the money it lends to major financial institutions.
Once a month, a committee assigned by the Bank
of England reviews
the base rate and determines what adjustments need
to be made based on the country’s economic
condition. |
