What are real rates as opposed to representative rates?

Real rates representative rates comparison for lenders

If you’ve been shopping around for finance recently, you may have noticed that some lenders show representative rates, while others show real rates. So, what’s the difference? To help you get a better idea of what you’re looking at when analysing your loan offers, we’ve been de-Baffling what real rates are and how they’re calculated.

What are real rates?

A real rate loan offer shows you the APR (Annual Percentage Rate) you’ll actually get if you take out that loan. This helps you fully understand how much the loan will cost you in interest before you apply.

A representative rate or typical rate is the rate that at least 51% of people can expect to be offered. This means when you apply, the rate you are actually offered could be higher or lower than the one you saw advertised.

Why do lenders show representative APRs?

All lenders and brokers are required to show representative APRs by the Financial Conduct Authority (FCA). This is because it makes it easier for borrowers to compare finance products and work out which is cheaper. In short, the lower the representative APR, the more likely it is you’ll be offered a lower rate.

What does the term ‘personalised rates’ mean?

A personalised rate is a real rate. They’re referred to as ‘personalised’ because real rates are calculated and offered based on the information a lender has about you. This means that different people will be offered a different rate when applying for the same loan.

How is my real rate calculated?

Your real rate (i.e. real APR) is calculated by the lender and is an estimation of how risky you’ll be to lend to. They base their decision on any available information they have on you, including:

  • Your credit score;
  • Your current financial situation;
  • Any history you have with that lender.

That’s why building up a healthy credit profile is important. It not only affects whether you’ll receive an offer, but also the rate you get.

Want to find out how you can start building a healthy credit profile? Read our guide to improving your credit score.

How do I know if I’m being shown a real rate?

A representative APR will always have the word ‘representative’ before it. If you’re being shown a real rate, this will often be indicated by the rate displaying as ‘guaranteed’.

Here at Freedom Finance, the majority of the offers we show have real rates. What’s more, we can provide you with quotes based on a soft search only. This means that you can shop around and know exactly how much a loan will cost you before you apply – all without affecting your credit score.

Want to see if you have any real rate loan offers? Check now by filling out our quick application

Published date: 30/03/2020

Share this page

Recommended Articles

How do rising interest rates affect you?

How do rising interest rates affect you?

13th December 2023

Over the past couple of years, the Bank of England raised the base rate dramatically. While this was in an...

Read about interest rates
Is your partner stealing your good credit score?

Is your partner stealing your good credit score?

31st October 2022

It’s a fairly standard setup in households for couples to divide the workload, with each person taking their share of...

Read about credit scores
How the mini budget affects you

How the mini budget affects you

27th September 2022

UPDATE: 25/10/22: The government has reversed many of these decisions since the mini-budget was announced on 23rd September 2022. We’ve...

Read about the mini budget
Can you get hire purchase with bad credit?

Can you get hire purchase with bad credit?

23rd August 2022

Hire purchase agreements can be an appealing car finance option for anyone that would like to own a car at...

Read about hire purchase