You have two offers in front of you, and one clearly has the lower interest rate. Then you notice the APR next to it, and that one is higher.
In short: between offers for the same amount and the same term, the one with the lower APR costs you less, not the one with the lower interest rate. The interest rate is only the price of the borrowed money. The APR (annual percentage rate of charge; THM in Hungary, DAE in Romania) puts the interest and the compulsory fees into one yearly percentage [1].
- Interest rate
- + upfront fees (arrangement, disbursement, valuation)
- + monthly fees and compulsory insurance
- = APR, one yearly number
An example: lower rate, dearer loan
Two made-up but realistic offers for the same €15,000 personal loan over 5 years:
| Offer A | Offer B | |
|---|---|---|
| Interest rate | 9.9% | 8.9% |
| Upfront fee | €0 | €450 |
| Monthly fee | €0 | €10 |
| Monthly payment with fees | €317.97 | €320.65 |
| APR | 10.36% | 12.23% |
| Total repaid with fees | €19,078.06 | €19,688.88 |
Offer B's rate is one percentage point lower, and its instalment before the fee is lower too. With the fees counted, it is still the dearer loan:
€610.82
The APR told you this up front: 12.23% against 10.36%. That's why it is the number to start with.
You may notice that with no fees at all, the APR is still above the interest rate (10.36% instead of 9.9%). That isn't a mistake. The APR turns the monthly rate into a yearly one as if the interest compounded, so on a loan with monthly payments it comes out above the rate even without fees. You don't pay more because of it: the interest charged is still 9.9%.
What the APR includes, and what it leaves out
Under the EU rules, the APR includes [1]:
- the interest;
- every fee, commission and cost the lender knows about;
- insurance, if you have to take it to get the loan.
It leaves out:
- notary fees;
- late-payment interest and other charges you only pay if you break the contract.
The APR also assumes two things [1]:
- You pay the loan for its full term. If you repay early, your real cost is different.
- A variable rate stays at today's level until the end. If the rate is fixed for a period and then follows an index, the APR uses the index's value today.
When the APR isn't enough
When the terms differ
For the same offer, the longer-term version can show a lower APR, even though you pay more in total. The APR doesn't fall over time. It is a yearly rate, so the same fee spread over more years adds less per year. With no fees at all, the APR is the same for every term.
Here is Offer B with only the €450 upfront fee, at the same rate for both terms:
| 5 years | 7 years | |
|---|---|---|
| Monthly payment | €310.65 | €240.58 |
| APR | 10.70% | 10.33% |
| Total repaid with fees | €19,088.88 | €20,658.18 |
The 7-year version has the lower APR, yet it costs €1,569.30 more, because you borrow the money for two more years. So the APR compares banks only at the same term: ask every bank for the same amount and the same term. The total repaid answers a different question, how long to borrow for. The shortest term whose payment you can comfortably afford costs the least.
When the rate is fixed only for a while
The APR of a loan fixed for 3 or 5 years assumes today's conditions carry on after the fixed period [1]. Nobody promises that. Ask which index the rate will follow, and what payment your budget could absorb if it rose.
Is there a cap on the APR?
In Hungary, yes. The APR on consumer credit is generally capped at the central bank base rate plus 24 percentage points. For some products, such as credit cards and overdrafts, the cap is the base rate plus 39 percentage points [2]. The base rate used is the one in force on the first day of the month before each half-year. That puts the cap at 30.25% for the second half of 2026; the base rate itself has been 5.50% since 26 August 2026 [3].
In Romania, Law 243/2024 caps the APR on consumer loans from non-bank lenders (IFNs) at the National Bank of Romania's lending facility rate plus 27 percentage points. Loans up to 25,000 lei have different limits instead: the total cost can't exceed 1%, 0.8% or 0.6% a day, depending on the amount, and you never repay more than twice what you borrowed [4].
A cap protects against extreme costs, but an offer below it isn't automatically cheap.
Try it with your own offers
Enter the offer's interest rate and fees. The calculator works out the APR and the total you repay, fees included. Your inputs stay in your browser.
The nominal rate from the offer, not the APR. Add the fees below to see the APR.
One-off costs taken at the start: arrangement, disbursement, valuation.
Costs paid with every instalment: account fee, mandatory insurance.
Optional fee applied to the principal you pay off early.
Fixed for 60 months
First payment: $199.40 principal + $111.25 interest
Total Repaid: $18,638.88
Total repaid with fees: $19,688.88
on $15,000.00 principal
Interest rate 8.9% → APR 12.23% once the fees are counted
Standard payoff
Original schedule total: $18,638.88
With extra payments
Accelerated total: $18,638.88
The table below follows the accelerated path to zero and includes any early repayment fee.
* This is a mathematical estimate. Record actuals in Volora to track real-world progress.
The calculator models a simple loan with equal monthly payments. A bank's APR can include other costs, such as yearly fees, so the official figure is the APR in the bank's offer.
Before you meet the bank
Write these three lines on a piece of paper, and check every offer in this order:
- The APR, for the same amount and term.
- The total repaid, fees included, to choose the term: the shortest term you can comfortably afford costs the least.
- The rate after the fixed period: which index it follows, and how far the payment could rise.
If an offer is missing the APR or the list of fees, ask for them in writing. To put two offers side by side, the Mortgage Reality Check saves them and ranks them by APR when the amount and term match. If they differ, it doesn't pick a winner. For when it pays to repay more than the instalment, read our guide to paying off a loan early.