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what is the apr

The Annual Percentage Rate or APR is an indicator in the form of an annual percentage that is used to compare the effective cost of two or more loans in a specific term, even if they have different conditions.

The APR is expressed as a percentage and is calculated using a standardized mathematical formula based on the nominal interest rate (NIR) -the price charged by the bank for lending us the money-; the frequency of the installments to repay the loan (monthly, quarterly, annual, etc.); the bank commissions and the transaction costs borne by the consumer.

In the case of loans, the APR includes the commissions charged by the bank, except for the expenses arising from the customer’s failure to meet payment obligations. Other expenses such as notary fees are excluded in calculating the APR.

formula for calculating interest on a loan

The interest rate of personal loans is one of the most important data that you should know in order to contract financing at the best price. Find here what are the TIN and APR, the cheapest loans and the evolution of their cost.

The interest rate of a personal loan can be defined as the price of borrowing a certain amount of money to pay it back in a given period of time. In other words, the cost for the bank to give us its money and for us to pay it back in monthly installments. There are two interest rates for consumer credit: the NIR and the APR.

The interest rate of a loan is one of the most important percentages to take into account when looking for financing. There are two percentages that will give us important information about the financing we are looking for:

Interest is the cost of credit, that is, what it costs us to borrow, but it should never be confused with the total cost of the loan, which is conditioned by the following factors:

bank interest calculator

The NIR is the fixed percentage that is agreed as a payment concept for the borrowed money. It indicates the percentage that the bank receives for lending the money. While the APR is the interest rate that indicates the effective cost or yield of a product.

The Annual Percentage Rate, or APR, is a percentage indicator that allows customers looking for a mortgage to compare different offers and thus have a reference of the real cost of the mortgage.

In essence, the APR is the rate that banks use and communicate to us in contracts for deposits, deposits, loans, credits and mortgages, and which reflects the payment of interest for the change in the value of money over a period of time.

On the other hand, the APR is calculated according to a standardized mathematical formula that takes into account the nominal interest rate of the operation, the frequency of payments (monthly, quarterly, half-yearly, etc.), the bank commissions for cancellation or amortization, and the expenses of the operation. In addition, it will be necessary to take into account if there are other expenses such as, for example, the opening commission.

interest rate spain

When it comes to borrowing money, there are two main things to consider: the Nominal Interest Rate (NIR), which is the price we pay for the money we borrow, and the Annual Percentage Rate (APR), which includes commissions, the term of the operation and the NIR of the loan we want to apply for. Next, we are going to know all the details of how both concepts affect a loan or mortgage.

The Nominal Interest Rate or NIR is the price we pay for a loan, that is to say, the money we have to pay the bank for the capital borrowed. The NIR is, therefore, a specific percentage of the total amount lent by a bank to establish the parameters of a financial operation such as a mortgage loan. In general, the NIR is calculated on a monthly basis. The NIR must be indicated in any contract for banking products such as deposits, loans, credits or mortgages, since it is the price we are paying for them, as explained in this content of Finance for Mortals.

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