Annual Percentage Rate

Table of Contents

The APR (also: annual percentage rate of charge) quantifies the total cost of a personal loan that a borrower has to pay. The APR is expressed as a percentage. If the interest on a loan is variable during the term, it is referred to as the initial APR and is usually given on an annual basis. Consequently, the interest rates usually contain the addition "p.a." (per annum). (per annum = per year).

1. What factors influence the APR?

While the "nominal annual interest rate" only indicates the interest payments, the "effective annual interest rate" includes all costs of a personal loan. Only by taking into account all costs incurred when taking out a loan does the prospective borrower have the possibility of easily comparing individual loan offers.

  • The APR is calculated from the following factors:

  • The debt at the beginning of the year

  • The monthly instalment, which includes interest and repayment

  • The nominal interest rate

  • Other costs for the borrower after the loan has been taken out (e.g. processing fees).

Please note: In individual cases, the annual percentage rate of charge does not include all costs. For example, account management fees or partial disbursement surcharges for construction financing are not always shown.

The APR is usually determined by the lender only after the credit check. Credit granted is the money that the lender makes available to the borrower.

2. The APR and the Consumer Credit Act (CCA)

According to the Consumer Credit Act (KKG), the APR must be explicitly stated in the credit agreement. If this is not possible, the annual interest rate and the costs charged after conclusion of the contract must be stated.

Maximum interest rate

In Switzerland, the maximum interest rate for consumer loans is set by the Federal Council (in the Ordinance to the Consumer Credit Act). The current effective maximum interest rate is 10%. Interest rates that exceed this 10% are illegal and are referred to as "fraud interest". interest rates".