Nominal rate vs APR
The nominal rate is the annual interest rate the bank charges on the principal. The APR adds what the nominal rate leaves out: fees, tied costs and the fact that interest is charged every month. With a nominal rate of 7%, the APR is already 7.23% from monthly payments alone, and 12.75% once you add a 1% fee and 45 € a month of insurance.
APR = (1 + nominal / 12)^12 − 1 (no costs)
Updated: · Albea Systems
Result
Yearly schedule
| Year | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | €4,752 | €1,290 | €3,462 | €16,538 |
| 2 | €4,752 | €1,040 | €3,712 | €12,826 |
| 3 | €4,752 | €772 | €3,981 | €8,845 |
| 4 | €4,752 | €484 | €4,268 | €4,577 |
| 5 | €4,752 | €175 | €4,577 | €0 |
When they come apart
With no fees or insurance, the APR is only above the nominal rate because of how often you pay: monthly, yearly or daily give different results at the same nominal rate. With costs, the gap grows fast, especially on short and small loans.
That is why the nominal rate tells you how much interest the bank charges, and the APR is what you compare two offers on. Always compare the real APR, with every cost in your offer.
Capital does this calculation on your device, with the same figures you see here.
Download on the App StoreFrequently asked questions
What is the nominal rate?
The annual nominal interest rate the bank charges on the amount lent, before fees and costs. It is the number advertised most.
What is the APR?
The annual percentage rate: the yearly cost of the loan in a single percentage, including costs and how often payments are made.
Which do I compare two loans on?
The APR, and better still the real APR with all your costs, next to the total outlay. The nominal rate alone is not enough.
More calculators
- Real APR of a loanAdd fee, appraisal, paperwork and insurance to see what it really costs.
- Loan paymentMonthly payment, interest and total paid under all three systems.
- Early repaymentReduce term or payment, with cancellation fee and against investing.
- French, linear and AmericanThe three systems with your numbers: payment, interest and balance.
- Amortization schedulePayment, interest, principal and balance every month and every year.
- Compare two loansReal APR, payment and total outlay of two offers side by side.
- Deposit: net interestGross interest, tax, fees, inflation and net return.
- Download on the App StoreCapital does this calculation on your device, with the same figures you see here.