The real APR puts consumer credit on the same line for comparison

Every one of us has certainly come across the concept of “APR,” but do you know what that really means? The annual percentage rate of charge is not only a mandatory disclosure requirement for banks and financial institutions, but also a great tool for comparing credit. In this article, we will tell you more about the real annual interest rate and why it is definitely worth considering.

Transparent costs make it easier to compare consumer credit


Are you considering taking out a consumer loan, but a comparison of loan offers makes you wonder? Do you find it difficult to generate total costs? As the name implies, the annual percentage rate of charge is the annual percentage rate of charge for the loan, which takes into account all interest and charges on the loan as well as the repayment schedule.

The Consumer Protection Act requires MFIs to disclose the effective annual interest rate to borrowers. Its calculation should not be applied, as the method of calculation and the assumptions used therein are regulated by a Decree of the Ministry of Justice on the effective annual percentage rate of charge on consumer credit.

Therefore, you can use this indicator with great care when comparing loan offers, because due to the exact regulations, the actual annual interest rates of different lenders are completely comparable and there is no solving reserve.

The cost of a consumer credit consists of the following factors:


  • the reference rate, which is usually the 3-month Euribor or the bank’s own prime rate plus the margin to be added thereto,
  • establishment costs,
  • annual or monthly fees,
  • processing fees such as account management fees and
  • other expenses such as installments.

The loan period also matters: the longer the credit period you choose, the more you pay for it. This, of course, is also reflected in the APR. Let’s illustrate the effect of costs and loan period on the APR using an example:

Example calculation of the annual percentage rate of charge for two different loan amounts and payment terms

The interest in the example is determined by the loan amount. In addition to the interest rate, the calculation of the APR takes into account the opening fee of EUR 50 and the account management fee of EUR 8.00 per month.

The method of reporting depends on the nature of the consumer credit


The method of reporting the APR will depend on whether it is a continuous or a one-time loan. In the case of continuous credits, the so-called credit limits, the annual percentage rate of charge is given as an example of the typical amount of credit used in the calculation, whereas in the case of lump sum, If the loan period were to be extended for any reason, the actual annual interest rate would also decrease as we mentioned above.