APRC is an abbreviation of the actual annual interest rate, i.e. the total cost of the loan, which is borne by each person repaying the loan. The APRC consists of:
- loan interest rate,
- fee for processing the application for a loan,
- fees for additional services that were provided by the bank, such as, for example, an advisor’s visit to the borrower’s home,
- all other bank charges.
All the above-mentioned fees are included in the monthly installment repaid by the borrower or borrower.
What is the APRC?
The APRC definition prepared by the Office of Competition and Consumer Protection reads as follows: “APRC is a calculation used by the client to compare the cost of loans offered by various financial institutions. It includes not only the interest rate on money borrowed, but also part of the other costs of the loan (including commissions). ” On the other hand, the legislator included the definition of the APRC in the Act on consumer credit: “the total cost of credit borne by the consumer, expressed as a percentage of the total amount of credit on an annual basis”.
The actual annual interest rate is calculated by banks and other financial institutions, referring to the total cost of the financial commitment, including the bank’s commission for granting the loan, all costs for considering the application for loan, insurance and any other bank charges. It is worth knowing that the APRC is an extremely useful tool that allows you to effectively compare the attractiveness of loans offered by many banks.
How to compare available credits and loans
If we compare loans with installments, we should only compare loans with the same repayment schedule, for example installments decreasing in one bank with decreasing installments in another bank, equal installments with equal installments from another lender. It is also worth knowing that the APRC is not complete information when it comes to loan costs, because all loans with very different costs for the borrower may have almost the same APRC.
Annual interest rate
It is important that if the actual annual interest rate is received dramatically from the nominal interest rate, it means that the bank has hidden part of its costs in additional fees. An excellent example here are parabanks that offer quick loans and bypass the anti-usury act add a lot of different costs, such as, for example, a visit of a financial advisor to the borrower.