The APR, or Actual Annual Percentage Rate of Interest, is defined by the Consumer Credit Act of May 12, 2011. According to the Act, it is “the total cost of credit to the consumer, expressed as a percentage of the total amount of credit on an annual basis.”

Thus, the APR determines all the costs that the consumer will incur in connection with the financial liability taken out. This is quite a convenience for borrowers because in offers, contracts and appendices, the costs of credit are broken down into many different items, which means that the borrower would have to calculate and compare the different values on his own. APR takes into account all fees in a clear and transparent way, thanks to which the borrower can realistically compare and choose the most favorable solution.

APR consists of:

  • interest rate,
  • bank’s commission,
  • costs related to the processing of the loan application,
  • insurance,
  • preparation fee,
  • commission,
  • interest,
  • other additional costs.

What should you keep in mind?

Keep in mind that the shorter the term of the loan, the higher the APR will be. Financing granted for a few months will always have a higher APR than the same loan concluded for a longer period.