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apr/aer?

does anyone know the differance between the 2 in simple terms? terms and conditions bank wbsites areway too complex to get my head around

thanks

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    I believe...

    APR is compounded interest over the year (so paying interest on interest)
    AER is the simple annual rate (ie 12 x the monthly rate)

    So AER is lower than APR.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    edited 21 July 2010 at 6:01PM
    APR is the annual percentage rate as applied to loans and includes any compound interest and fees.

    AER annual equivalent rate is the equivalent to APR but generally applied to savings and includes compounding (i.e. for monthly paid interest)
  • CannyJock
    CannyJock Posts: 3,838 Forumite
    1,000 Posts Combo Breaker
    Same thing. One is on debts. The other is on savings.
    "A child of five could understand this. Fetch me a child of five." - Groucho Marx
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