Discover how interest works

When you take out a loan or buy something with a credit card, you’re borrowing money with the promise to pay it back later. But what you borrow and what it ends up costing can be two different amounts because of the interest charged by the credit card or loan provider.

What is an APR?

Interest is usually called the Annual Percentage Rate or APR. This is the total cost of your borrowing over a year including interest and standard fees charged, and is normally shown as a percentage.

APRs are shown as a percentage to make it easier to compare the different rates offered by lenders. All lenders are legally required to calculate their APR based on the same rules, so it’s easier to weigh up your options.

What’s a good APR?

A good APR depends on whether you can afford to make the repayments at the rate you’ve been offered. APRs are set by lenders based on your credit score and reflect the risk to the lender.

To stand a better chance of getting your hands on a decent APR, you’ll usually need a good credit score, so it’s worth checking your score before you apply.

Doing things like making sure the information showing on your credit file is accurate, keeping on top of all your repayments, and creating a history of responsible borrowing will all help your credit score be as good as possible. Check out our handy guide on how to improve your credit score.

When applying for credit, it’s important not to make too many applications within a short space of time. This can set alarm bells ringing for lenders as it can look like you’re applying for lots of different credit.

What's the best way to borrow?

As with any financial decision, consider:

  • Whether this is the right option for you.
  • The risks of taking on too much debt.
  • The cost and time it’ll take to repay anything you borrow.

Compare borrowing options from MBNA

Decided on a credit card?

Take an eligibility check to see which MBNA credit cards you’re eligible to apply for, your estimated credit limit - all without affecting your credit rating. Your Clever Check results will include details of any promotional offers, along with a representative APR and example to help you understand the costs.

It’s a quick and easy way to see if we can meet your borrowing needs before you spend time completing a full application.

Credit Card Eligibility Checker

Making repayments

Credit cards can give you flexibility when it comes to repayments. You must make at least the minimum monthly payment, but you can repay more than that whenever you want, up to the full statement balance. It’s up to you - just remember, if you only make the minimum payments each month, it’ll take you longer and could cost you more to clear your balance.

For a personal loan you need to have a Direct Debit in place to cover your fixed monthly repayments, but you can make debit card repayments at any time to reduce your interest costs and the loan term.

You can make as many extra repayments you will like, but bear in mind you’ll be charged up to 58 days’ interest if you settle the loan early.

Other things to consider

Although the APR and interest rates are some of the most important things to think about when choosing your next borrowing option, you should also look at the benefits and drawbacks of each. So, when you’re shopping around, be on the lookout for features that will be most important to you based on how you plan to use them.

Interest rates and fees are important when looking for credit. They can be the difference between an affordable monthly repayment and 1 that squeezes your budget. Knowing the costs can help you make an informed decision about what’s best for you.

Important: the content of this page is not intended to be taken as financial advice or recommendation from MBNA. You should seek independent financial advice if you're unsure about your financial needs.