APR and borrowing rate: what is the difference?
Two rates appear on every credit offer. Only one lets you truly compare: the APR.
The borrowing rate
The borrowing rate is the interest rate applied to the capital borrowed. On its own, it does not tell the whole cost of your loan.
The APR
The annual percentage rate of charge includes the borrowing rate and all mandatory fees: arrangement fees, guarantee fees, insurance if required. It is calculated the same way across the European Union.
That is why the APR is the only rate that lets you compare two offers.
The total cost of credit
This is the sum of all interest and fees you will pay. Together with the total amount payable, it tells you what your project really costs.
Key points
- Always compare APRs, never borrowing rates alone.
- Look at the total cost and total amount payable.
- This information must appear in the representative example of any advert and in your European information sheet.
