APR, AER and EAR are Terms Used in Financial Advertising – What do They Mean?
Have you ever scanned the acres of financial advertising and wondered what APR, AER and EAR really mean? You’ll invariably find one or another of these terms in every advertisement for a lending or savings product. Well you’re certainly not alone. The Financial Services Authority lays down the exact formulas for calculating APR, AER and EAR’s. Every UK financial institution then has to stick by the formulas and the FSA lays down rules as to when and how the figures have to be disclosed. There are no exclusions! Errors invariably result in big fines for the offending company and compensation for any borrower or saver affected. But it’s still no good if the public simply don’t understand what the terms mean. So here’s our bit to lift the mists of misunderstanding! APR is most commonly seen. It stands for “annual percentage rate” and is used to express the true cost of the money borrowed on credit cards, loans and mortgages. The APR calculation takes account of the basic interest rate, wh
