Calculation of the annual percentage rate of charge

Updated last 26.03.2021

What is the annual percentage rate of charge?

In order to find out exactly how much a business loan from one bank or another cost, you have to calculate the annual percentage rate of charge (APRC). In accordance with art. 19, para 1 of the Consumer Credit Act this is an indicator that calculates the total costs under the loan, present or future (interest, other direct or indirect costs, commissions, remunerations of any kind, including those due to intermediaries arranging the signing of the agreement), expressed as annual percentage rate of charge of its amount. The bank provides the APRC in the general terms and conditions on the loan.

How is the annual percentage rate of charge calculated?

This is an objective indicator of the cost of your loan. It is calculated by adding up all costs you will incur in the form of outflows on the loan and which you will pay to the servicing bank, divided by the weighted average base of its amount over the entire term of the loan.

The Consumer Credit Act, Appendix No 1 to art. 19, para 2 provides a formula and additional information as to how to calculate mathematically the annual percentage rate of charge. It should be taken into account that the stated provision is applicable only in relation to the consumer credits. As for the other credits there is no legally set formula.

Important to know
	If the calculation formula seems complex, you can use the free-of-charge credit calculators which are accessible online (see below EC applications). However, it is recommended that you check your calculations.

What is not included in the annual percentage rate of charge?

The following expenses are not included in the calculation of the annual percentage rate of charge:

• Charges payable by the consumer for non-compliance with any of his commitments laid down in the consumer credit agreement;
• Charges other than the purchase price which, in purchases of goods or services, the consumer is obliged to pay whether the purchase is paid in cash or by credit;
• In relation to the maintaining of an account in connection with the consumer credit agreement;
• The costs to use a payment instrument (credit or debit card, overdraft), allowing for some payment related to the utilisation or repayment of the loan;

Costs related to payment transactions, unless the opening of the account is optional and the costs related to the account have been clearly and separately shown in the credit agreement or in any other agreement concluded with the consumer (art. 19 para. 3 of the Consumer Credit Act).