What to remember
- The nominal rate calculates interest; APR also reflects included costs.
- Match the amount, currency, term and salary conditions.
- An unconfirmed APR does not mean borrowing is free.
What does each rate tell you?
The annual nominal rate is used to calculate interest on the outstanding principal: the loan amount you still owe. It excludes fees. The annual percentage rate (APR, or NEI in Albanian) expresses borrowing costs as a yearly percentage, taking account of the amounts and dates of drawdowns and payments. APR is not an additional charge and is not added to the nominal rate.
| Comparison | Nominal rate | APR |
|---|---|---|
| What does it include? | Interest only | Interest and included costs |
| What is it used for? | Calculating interest in the repayment schedule | Comparing offers on matching terms |
Which costs are included in APR, and which are not?
Alongside interest and loan fees, known account and insurance costs are included when mandatory to obtain the loan or the offered terms. Ask the bank to list included and excluded costs: APR does not cover every expense you may face, such as late-payment penalties, optional insurance and certain third-party payments, including notary and mortgage registration costs.
Example: 5.00% nominal rate, 6.06% APR
Consider a hypothetical ALL 100,000 loan for one year at a 5.00% nominal rate. Principal and interest are repaid in a single payment exactly one year later. Compare two versions: no fee, and an upfront ALL 1,000 fee deducted from the loan proceeds. There are no other costs.
| Item | No fee | With a fee |
|---|---|---|
| Annual nominal rate | 5.00% | 5.00% |
| Upfront fee | ALL 0 | ALL 1,000 |
| Net amount received | ALL 100,000 | ALL 99,000 |
| Interest for one year | ALL 5,000 | ALL 5,000 |
| Payment at year end | ALL 105,000 | ALL 105,000 |
| Borrowing cost: interest + fee | ALL 5,000 | ALL 6,000 |
| APR | 5.00% | 6.06% |
With the fee, APR = (105,000 ÷ 99,000 − 1) × 100 ≈ 6.06%. You receive less money upfront but repay the same amount at the end, so APR is higher. This is an illustration by Kredi Bankare, not a bank offer. The simplified formula applies only to this example with one payment after one year; instalment loans require each payment and its date to be taken into account.
How to compare offers in practice
Request offers for the same amount, currency, term and repayment schedule. Compare lek (ALL) and euro (EUR) loans separately, including any conditions for paying your salary into the lending bank. A lower nominal rate does not guarantee a lower APR. Also check the instalment, total amount payable and costs outside APR. Published bank examples are indicative; request standardized pre-contractual information for your own offer.
What if the interest rate changes?
Today’s APR does not predict future benchmark-rate changes. For a variable-rate loan, check the formula after the fixed period, the minimum rate and how often it is reviewed. Also ask for an instalment estimate assuming interest rates rise.
Questions to take to the bank
Use this list when requesting your written offer.
- How much will reach my account after deductions?
- Which charges are in APR, and which are paid separately?
- Does the example match my amount and term?
- What is the total repayment under this interest-rate scenario?
Frequently asked questions
Is APR added to the nominal rate?
No. They describe the cost in different ways. Do not add them together.
What if the bank has not published APR?
Read the nominal rate and known fees, then request APR for your offer. Incomplete data cannot establish the cheapest offer.
Sources and examples
Regulatory basis: Bank of Albania, Regulation 59 on transparency ↗
Links beside specific explanations identify their official sources. Worked examples are educational assumptions, not bank offers. The bank confirms the terms for your situation.