Stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded each year.

Annual Equivalent Rate.Â This is a notional rate which illustrates what the gross rate would be if interest were paid and compounded each year.

Interest calculated under the assumption that interest is paid and compounded every year.

A figure quoted in loan advertisements to help people make compare one product with another. It indicates what the rate would be if interest was paid just once a year Where interest on loans is expressed as other than a yearly rate, for example 1.5% per month, APR is the equivalent rate over a year, in this case 19.56%. The Consumer Credit Act 1974 requires companies that advertise loans or credit cards to state what the APR rate is. This enables would be borrowers to compare rates and to see the true rate of interest repayment they would incur over the full year

The annual equivalent rate is the rate of interest as if paid and compounded on an annual basis.

This is a notional rate for savers which illustrates what the gross interest rate would be if interest was paid and added to the account annually. AERs on an account which pays monthly interest assumes interest is added to the account at the end of each month during the year.

The notional annual rate of interest applied to current, deposit and savings accounts assuming that all interest is reinvested or compounded.