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Short-term loan vs credit card
Which costs less? When the 0% card wins and when a personal loan is the smarter choice — with a worked example using the same amount and term.
7 min read → Understanding borrowing
What is APR?
Explained simply
APR is the most quoted number in lending — and one of the most misunderstood. Here's what it actually means, how it's calculated, and why a 49.9% APR short-term loan can cost less than a 20% APR credit card.
4 min read • Cash Train editorial team
The simple definition
APR (Annual Percentage Rate) is the total cost of a loan or credit expressed as a percentage of the amount borrowed, calculated over one year, including interest and any mandatory fees.
It's a standardised number designed to make it easier to compare different borrowing products — from a mortgage to a credit card to a short-term personal loan. Because it's always expressed as an annual rate, you can compare a 3-month loan and a 30-year mortgage on the same scale.
How APR is calculated
The exact formula is complex, but the key inputs are:
The loan amount
Also called the principal — the amount you actually receive.
The interest rate
The nominal rate charged, expressed as a percentage per period.
The repayment schedule
How many payments, how large, and when they fall.
Mandatory fees
Arrangement fees or compulsory insurance are included. Optional fees (payment protection, for example) are not.
The FCA requires all UK consumer credit lenders to show a Representative APR alongside their headline figures. "Representative" means at least 51% of customers who apply are expected to receive that rate (or better).
Why a high APR doesn't always mean an expensive loan
This is where most people get confused. APR is an annualised rate. For a loan you repay in 3 months, the APR looks very high — because it's showing what that rate would cost if you borrowed for a full year.
Short-term loan
Borrow £200 for 2 months at 149.9% APR
Total interest: ~£27
APR looks scary; actual cost is modest
Standard credit card
Borrow £200 at 25% APR, minimum payments only
Total interest: £200+
Lower APR; much higher real cost over time
The credit card has a lower APR but costs far more in actual money — because the borrower makes minimum payments and the debt runs for years. APR alone doesn't tell you the total cost. Total repayable does.
Total repayable: the number that actually matters
APR is useful for comparing products on a like-for-like basis. But when you're deciding whether to borrow, the number you should focus on is:
Total repayable
= Amount borrowed + all interest + all fees
This single figure tells you the complete cost of borrowing. Compare it across options for the same amount and repayment period, and the one with the lowest total repayable is the cheapest — regardless of APR.
Lenders in the UK must show you the total repayable in their credit agreement before you sign. At Cash Train, it's shown upfront in the calculator before you register.
Representative APR vs your APR
The APR quoted in advertising is "representative" — it means at least 51% of approved applicants get that rate or better. Up to 49% can be charged a higher rate based on their individual profile.
Your actual APR will be in your personalised offer, which you'll see before signing. Never sign without checking your personal rate and total repayable — not the representative figure from the advert.
Quick reference
APR: Annual Percentage Rate — annualised total cost including interest and fees
Representative APR: Rate offered to 51%+ of approved applicants. Your rate may differ.
Total repayable: The actual amount leaving your pocket. The number to compare.
Monthly payment: What leaves your account on the repayment date each month.
Term: The number of months the loan runs for.
Early settlement: Repaying early — you get a rebate on remaining interest (CCA 1974 right).
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Common questions
FAQ
APR stands for Annual Percentage Rate. It expresses the total yearly cost of credit — including interest and mandatory fees — as a single percentage, allowing you to compare products from different lenders on a like-for-like basis.
APR is designed to compare the cost of credit held for a year. For a very short-term loan — say, £200 for 30 days — the total cost in pounds may be small even when the APR appears very high. The total cost in pounds for your specific amount and term is a more useful guide than APR alone for short-term borrowing.
A representative APR is the rate that at least 51% of successful applicants receive. Because lenders can offer different rates to different customers, the representative figure lets you compare products — but your actual rate may be higher or lower depending on your individual credit and affordability assessment.
Cash Train's representative APR is calculated by converting the daily interest rate on each product into an annual equivalent, taking into account the loan term and the £5 establishment fee where it applies. The exact figure depends on the product tier and term — see our rates page for full examples.
Transparent pricing from day one.
Cash Train shows you the total repayable upfront — no surprises. Apply online today.
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