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APR is a measure designed to help customers compare different credit offerings. However, as helpful as this is when comparing like products, it is just as unhelpful when comparing different products.

For example, if you are comparing two loans for the same value, taken for the same length of time, APR is a brilliant means of calculating the cost of borrowing and helping you to decide which one would cost less and, therefore, be preferable. However, if you are comparing loans with different variables, for example a £200 loan taken for the period of a month to a £3,000 loan borrowed for the period of a year, using an Annual Percentage Rate (APR) will not necessarily give a clear picture of the cost of borrowing. These loans are not exactly comparable; it’s similar to comparing apples with oranges.

What you need to consider when comparing different loans is what you want the loan for, how much you want to borrow, and how long you need the money for....

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