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Annualised Percentage Rate (APR)
A definition intended to identify the true cost of borrowing and to provide the consumer with a method of comparing the true costs of different types of loan. Mortgage loans were originally excluded from a requirement to quote an APR, possibly because it is a highly inappropriate way of comparing mortgage loans. APR was designed more to reflect the cost of different types of hire-purchase contracts which, at the time the legislation was drafted, were frequently quoted on flat and fixed basis giving headline rates which were often half the APR. It is a legal requirement that a true APR figure be provided with any loan illustration.
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