APRC stands for annual percentage rate of charge. It is the total cost of a secured loan, also called a homeowner loan or second charge mortgage, expressed as one yearly percentage that includes the interest rate, the fees you must pay to get the loan, and any move to a higher reversion rate after an initial deal, over the full term. It is almost always higher than the headline rate, and has been compulsory on secured loan illustrations since 2016.
- The APRC combines the interest rate and the compulsory fees into a single annual percentage over the whole term.
- It is usually higher than the headline rate because fees are included and any reversion rate is assumed to apply.
- The FCA requires an APRC on every regulated mortgage illustration, including second charge secured loans.
- A representative APRC in an advert must be one at least 51% of customers responding are expected to receive.
- Two loans with the same APRC over the same term will cost you about the same in total, whatever their headline rates.
What does APRC stand for and what does it include?
APRC is the annual percentage rate of charge. It is the mortgage-market cousin of the APR on credit cards and personal loans, and it does the same job: it takes everything you pay to borrow, not just the interest, and expresses it as a single yearly rate so that different loans can be lined up against each other. Since second charge lending moved under the FCA's mortgage rules in 2016, every secured loan illustration must show one.
The calculation includes the interest charged over the full term, plus the compulsory costs of obtaining it: a lender arrangement or product fee, a broker fee if you pay one, valuation and legal costs where they are compulsory, and any other charge that is a condition of borrowing. It leaves out optional extras and charges that only arise if something goes wrong, such as late payment fees or early repayment charges.
The result says: "over the whole life of this loan, fees included, borrowing this money costs the equivalent of this rate each year". That is why a secured loan quoted at a headline rate of 7.9% will show an APRC above 7.9% as soon as any fee is attached, and why loans with different fee structures can be compared honestly on APRC but not on rate alone. Our guide to secured loan rates covers where the headline rate comes from.
Why is the APRC higher than the interest rate?
Two things push it up. The first is fees. Any charge that must be paid to get the loan is spread across the term as part of the cost of credit, lifting the annual figure above the pure interest rate. The bigger the fees relative to the loan, the larger the gap, which is why a small secured loan's APRC can look strikingly high while a large loan with the same fees sits close to the headline rate.
The second is the reversion rate. Many secured loans have an initial fixed or discounted period, after which they revert to the lender's standard variable rate, usually higher. The APRC assumes you stay for the whole term and move onto the reversion rate when the initial period ends. A five-year fix on a 15-year loan is counted at the fixed rate for five years and the reversion rate for ten, and the blend can sit well above the fixed rate you were quoted.
This is the APRC's one real weakness. If you expect to refinance or repay when the fixed period ends, the assumed reversion years never happen and the APRC overstates what you will actually pay. It remains the right figure for loans you intend to run to term, and the illustration also shows the total repayable and the monthly payment. Our guide on paying off a secured loan early covers leaving sooner.
How do you use the APRC to compare secured loans?
Compare the same amount over the same term. The APRC then tells you which loan costs less overall, and the total repayable confirms it in pounds. Here is how fees move the picture on a £20,000 secured loan over 15 years, with no fees and with £1,795 of broker and lender fees added to the loan.
Illustrative rates: The rates in this example are fictional and used only to show how the numbers work. They are not an offer. Your actual rate may be lower or higher and will depend on your circumstances, your property and the lender. Consolidating debt over a longer term can mean you pay more interest overall, even if your monthly payment falls.
| No fees | £1,795 fees added | |
|---|---|---|
| Current monthly payments (cards and personal loan) | £532/month | £532/month |
| New secured loan payment at 7.9% over 15 years | £190/month on £20,000 | £207/month on £21,795 |
| Total repayable over the 15-year term | £34,196 | £37,265 |
Both loans carry a 7.9% headline rate, yet the second costs £3,069 more. The fee-loaded loan would show an APRC noticeably above 7.9%, while the fee-free loan's APRC would sit at the rate itself. On headline rate the two look identical; on APRC the gap is immediate.
If one loan has a lower APRC but a shorter term, ask the broker for both over the same term. Treat an advertised representative APRC as a starting point only; your own illustration, priced on your credit history and loan-to-value, is what counts. Our secured loan calculator lets you test how term and fees change the totals.
Why does the FCA require an APRC on secured loans?
Because headline rates on their own are easy to game. A lender can advertise a low rate and recover its margin through fees or an expensive reversion rate, and a borrower comparing on rate alone would never see it. The APRC came in under the Mortgage Credit Directive to stop that, and the FCA wrote it into its mortgage conduct rules, known as MCOB, when second charge loans came under mortgage regulation in 2016.
The rules go further than the illustration. Any secured loan advert that mentions a rate or cost must show a representative APRC, which must be one that at least 51% of customers responding to the advert are expected to receive. The number in the advert cannot be a rate only the best customers get.
None of this makes a secured loan safe. The loan is secured on your home, which may be repossessed if you do not keep up the repayments, and a clear APRC does not change that. It simply means you can see the true price before you commit. If you are comparing loans because your debts have become hard to manage, speak to MoneyHelper, StepChange or Citizens Advice first; their advice is free and impartial. Checking your options with them, or with an FCA authorised broker, will not affect your credit score.
The APRC is the wrong figure to lean on if you are certain you will repay or refinance the loan when its fixed period ends, because the years it assumes on the reversion rate will not happen and the number overstates your real cost; compare the initial rate, the fees and the early repayment charge instead. It also tells you nothing about affordability, so a low APRC is no comfort if the monthly payment is a stretch. And if the reason you are studying rates is that your current payments are already being missed, free advice from StepChange, MoneyHelper or Citizens Advice should come before any new secured borrowing.
Worried about debt? Get free advice first
If you're struggling, it's worth speaking to a free, impartial debt advice service before you borrow more. They don't sell anything and won't judge your situation.
- MoneyHelper: Free, impartial debt advice backed by government
- StepChange: The UK's largest free debt charity
- Citizens Advice: Free, confidential advice on debt and money
Checking your options with Equiclear will not affect your credit score.
Frequently asked questions
Is APRC the same as APR?
They measure the same thing, the total cost of credit as a yearly rate including fees, but APRC is the version used for mortgages and secured loans, while APR is used for credit cards and personal loans. APRC also assumes you move to the reversion rate after any initial deal ends.
Why is the APRC on a small secured loan so high?
Because fixed fees such as valuation, legal and arrangement costs are a larger share of a small loan than a large one. Spread across the term, they lift the APRC further above the headline rate. On a small loan it is worth asking whether each fee can be reduced or avoided.
Does the APRC include early repayment charges?
No. The APRC includes only the costs you must pay to obtain and keep the loan on its normal terms. Early repayment charges, late payment fees and other charges that depend on how you behave are excluded, so check those separately on the illustration before you sign.
What is a representative APRC?
It is the APRC shown in a secured loan advert, and under FCA rules it must be a figure that at least 51% of customers responding to that advert are expected to receive. Your own APRC may be higher or lower depending on your credit history, loan-to-value and the fees on your case.
Should I choose the secured loan with the lowest APRC?
Usually, if you are comparing the same amount over the same term and plan to keep the loan to the end. If you expect to repay early, weigh the initial rate, fees and early repayment charge instead. Whatever the APRC, the monthly payment must be comfortably affordable.