Example NIR for a mortgage loan
The monthly NIR for mortgage loans is obtained by adding the spread applied by the bank to the Euribor.
NIR = Euribor (-0.368% in March 2020) + spread (1.25) = 0.882% NIR.
The NIR does not consider any expenses associated with the mortgage. It is only the interest agreed with the financial institution for the loan. The NIR does not have to be annual, unlike the APR.
Differences between APR and NIR
We would say that the APR is probably the most useful of the two for consumers, as the NIR is merely informative.
The APR tells the borrower the real cost of the loan they have applied for, as it includes the fees, interest and term of the loan. The APR provides a clearer and more transparent view of all the costs of the loan. The APR is a very useful index for consumers, as it allows them to understand whether the loan is affordable before they accept it.
These indicators are also used by banks and financial institutions as a competitive advantage, allowing them to clearly identify and advertise their offers to potential customers.