Which financial products have an APR?
We find APRs in three types of financial products:
As the repayment period is more than one year, the APR may vary the amount to be repaid by the customer slightly. A mortgage is usually arranged with the property as the guarantee of payment, so it does not include some extra costs, such as appraisal and taxes.
The APR indicates the actual cost of repaying a consumer loan or personal loan.
For some products, such as accounts and insurance, the APR indicates the returns generated by the money we deposit.
What does the APR not include?
With mortgages, costs paid to third parties - such as notary and analysis fees - are not included in the APR. Items relating to insurance and guarantees are also not included.
Other aspects that should be taken into account include:
- The APR reflects the annual interest rate. However, the nominal interest rate may refer to monthly or six-monthly periods.
- There is no point in comparing the APRs of fixed and variable-rate loans. With variable-rate loans, we cannot know how the interest rate will change over time.
- Comparing the APRs of loans only makes sense over the same time period.
When comparing offers, the APR gives us an idea of which is the best for us. But if it is a variable-rate loan we do not know how the APR will change over time. This is why we talk about variable APRs and say that they are only for information.