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Nominal rate vs. annual percentage rate
Why the effective annual rate matters more when comparing loans.
By Hamematir editorial teamPublished Oct 09, 2026Reviewed Oct 09, 20261 min read
Nominal interest rate
The interest the bank charges on the outstanding balance. It does not include fees.
Annual percentage rate (effective rate)
The effective rate also includes mandatory charges such as origination or servicing fees. That is why it is usually higher than the nominal rate.
How to compare
- Compare offers for the same amount and term.
- Look at the effective rate, not just the nominal one.
- Check the early repayment conditions.
Our loan calculator shows the monthly payment and total interest. The bank provides the final figures.