Why the APRC differs from the interest rate in your contract
Your contract shows two percentages and they never match. Understanding which one to trust is the difference between comparing offers properly and being quietly overcharged.
Reviewed 2026-07-30How we calculate
Open this scenario in the calculatorWhat each rate measures
The nominal rate, sometimes called the interest rate or borrowing rate, is the price of the money alone. The APRC, the annual percentage rate of charge, is the total annual cost of the credit: the interest plus every fee the lender requires you to pay to get it. Two loans can advertise the same nominal rate and cost meaningfully different amounts, and the APRC is where that difference becomes visible.
Loan amount €250,000 · Term 25 years · Interest rate 4.50%
- Monthly instalment
- €1,389.58
- APRC
- 4.59%
- Total interest
- €166,875
Computed by the same engine as the calculator, so these figures match what you see if you open the scenario.
Why it is higher, for two separate reasons
The first reason is compounding. A nominal 5% charged monthly is not 5% a year in effect, because each month's interest is calculated on a balance that already carries the previous months. The second reason is fees: arrangement fees, valuation costs, mandatory insurance and monthly administration charges all enter the APRC. A loan with a low nominal rate and heavy upfront fees can carry a higher APRC than one with a slightly higher rate and none.
How it is actually calculated
The APRC is not a formula you can rearrange. It is defined in Annex I of EU Directive 2014/17 as the rate that makes the present value of everything you pay equal the amount you receive, with all intervals expressed in years. There is no closed-form solution, so it is found numerically. This matters because it means the APRC cannot be estimated by multiplying anything; it has to be computed from the full schedule of payments.
What the APRC still will not tell you
It assumes the rate holds for the whole term, so on a variable-rate loan the published APRC is a snapshot under today's index, not a forecast. It also only includes costs the lender requires; optional insurance you buy elsewhere sits outside it. And two APRCs are only comparable when the amount and the term match, which is why comparing a twenty-year offer's APRC against a thirty-year one tells you less than it appears to.
Using it to compare offers
Ask each lender for the APRC on the same amount and the same term, and compare those. If one refuses or quotes only the nominal rate, that is informative in itself, because publishing the APRC is a legal requirement rather than a courtesy. Then enter both offers in the calculator with their fees to see the total cost in money rather than in percentages, which is usually where a surprising winner emerges.
Sources
These guides are information, not financial advice. Your own contract governs the day-count convention, the fees and the early repayment terms, and those vary between lenders and countries. Check any figure against your contract before acting on it.