Also known as: Annual percentage rate of charge, RPMN
APRC
The annual percentage rate of charge. A single figure expressing the total cost of a loan including fees, which is why loans compare better by it than by the interest rate.
The interest rate says only what the borrowed money costs. The APRC tries to say what the loan costs you in full, including the fees the bank charges alongside the interest.
That is why a leaflet often shows two figures and the second one is higher. It is not a trick; quite the opposite: the APRC is the more honest of the two.
How it works
The APRC is not the sum of the interest and the fees. It is the rate at which everything you pay the bank exactly balances what it actually paid out to you.
The law sets out precisely what belongs in it: interest, the arrangement fee, compulsory insurance, account administration. The timings enter the calculation too: it matters whether you pay a fee at the outset or spread over the years.
Why adding up does not work
A consumer loan of €10,000, a rate of 5%, a term of 5 years. The monthly instalment is €188.71.
The bank deducts €300 for arranging it, so €9,700 reaches your account, yet you repay as though you had received €10,000.
APRC = 6.44%
A naive sum would give 5% + 3% = 8%. That is a percentage point and a half out.
Why is the true figure lower than that sum? Because you pay the €300 once, not every year: over a five-year loan its weight is spread out. And at the same time you are gradually repaying the principal, so on average you owe far less than €10,000.
The APRC is therefore not a list of costs. It is a calculation that also accounts for when the money moves: the same principle as the effective interest rate.
Why it matters
Without the APRC, loans cannot be compared. A bank can squeeze the interest rate down to a pretty number for the advertisement and take its due in fees instead. Two loans with the same interest can have markedly different APRCs, and the one with the lower figure is the cheaper.
That is why lenders are required by law to state it. It is the only figure that puts two differently structured loans on a common denominator.
What to watch out for
The APRC applies to a specific case. It is calculated for a given amount, term and way of drawing the money. A lower APRC on a different term does not mean it would also be lower on yours.
A lower APRC does not mean a lower instalment. They are two different things. A shorter loan usually has a better APRC but a higher monthly instalment.
It does not cover everything. Voluntary insurance, an early repayment fee or penalties for late payment are not in it, because there is no way to know in advance whether they will arise.
Try it yourself
In the mortgage calculator you can see how the total amount paid changes at different rates and terms: that is, what the APRC compresses into a single figure.