The annual percentage rate (APR) is the ratio of total loan-related costs expressed as a percentage.
The calculation includes, for example, the loan amount, the loan origination fee, the interest rate and other costs such as property insurance, the land register fee, the property appraisal fee and similar costs.
In addition to the interest rate, the loan origination fee, the appraisal, registration of the lien, property insurance and other loan-related fees are included in the APR as well.
The interest rate is one of the values that are part of the APR calculation and is an expression of the cost of the loan in percentage terms.
For example: The interest rate determines the amount of interest included in the monthly instalment and is a cost for the client. Interest, along with the additional fees, is recalculated to an APR percentage value to enable comparison of the total loan-related costs with various loan structures. For example, if you compare a loan with an interest rate of 1.35% and APR of 2.10% and a loan with an interest rate of 1.55% and APR of 1.85%, you will actually pay less for the loan with the APR of 1.85% even if at first sight it has a higher interest rate. With the first loan, you will pay less in interest but the other costs, such as insurance, loan origination fee, etc. are so high that the second loan with the APR of 1.85% is better for you, even with a higher interest rate.