What rate am I paying
Published 14/11/2010 | 05:00
Confused what interest rate you're paying on your loan or credit card? Join the club.
Most lenders quote two types of interest rates on loans -- a nominal rate and an annual percentage rate (APR). For example, if you're borrowing more than 80 per cent of the cost of your home, AIB's variable mortgage rate is a nominal rate of 3.49 per cent -- or an APR of 3.54 per cent if the mortgage is being repaid over 20 years.
The APR reflects the interest rate and the term of the loan -- as well as any other costs such as administration or arrangement fees
The nominal rate on the other hand doesn't include extra charges.
"The APR is supposed to encompass other charges and to reflect the fact that interest can be charged more than once a year," says Ronan Coburn of The Bottom Line.
"For example, if you don't pay off your credit card bill in a particular month, in the following month, you could be paying interest on any interest you ran up the month before."