APR and KKM explained: the only fair way to compare loans
The annual percentage rate of charge — APRC, known in Estonia as krediidi kulukuse määr (KKM) and in Finland as todellinen vuosikorko — expresses the total yearly cost of a loan, including interest and all mandatory fees, as one percentage. EU law requires lenders to disclose it, precisely so borrowers can compare offers like-for-like.
Why the interest rate alone misleads
The advertised interest rate is only the price of the money. Loans also carry contract fees, setup fees, account or administration charges — and these differ widely between lenders. A loan with a lower interest rate but a high setup fee can easily cost more in total than a higher-rate loan with no fees.
The APRC ends this comparison problem by folding every mandatory cost into a single annualised percentage. Two offers with the same APRC cost you the same per year, whatever the split between interest and fees.
What the APRC includes — and what it doesn’t
Included: the nominal interest, mandatory one-time fees (contract/setup), and recurring mandatory charges tied to the credit. Under EU consumer credit rules, lenders must state the APRC in advertising and in the standardised pre-contract information you receive before signing.
Not included: optional extras you choose freely (like voluntary payment insurance), penalty fees, and costs that don’t stem from the credit agreement itself. If an "optional" insurance is in practice required to get the advertised rate, its cost belongs in the APRC — treat pressure to bundle skeptically.
How to use APRC when comparing
Ask every lender for an offer with the same amount and the same term — the APRC is sensitive to both, so mismatched offers are not comparable. Then rank offers by APRC, not the headline rate.
This applies to every credit type: personal loans, car loans and mortgages. For mortgages, the APRC also captures valuation and contract fees, which vary meaningfully between banks.
Frequently asked questions
Is a lender required to tell me the APRC?+
Yes. Under EU consumer credit law, transposed in every Nordic and Baltic member state, lenders must disclose the APRC in advertising that mentions a cost figure and in the standardised information sheet you receive before signing.
Why does the same loan show different APRC for different amounts?+
Fixed fees weigh more on small, short loans: a fixed contract fee spread over a small loan raises the annualised cost sharply. That is why you should compare offers only at the same amount and term.
Is the APRC the rate I pay monthly?+
No. Your monthly payment is calculated from the nominal interest rate and schedule; the APRC is a standardised total-cost measure for comparison. A loan is repaid at its contract rate — the APRC just tells you what it all costs per year.
What is a good APRC?+
It depends on the credit type, your profile and the market moment — secured loans run far below unsecured ones. The practical answer: the best APRC among several real offers for your amount and term. Comparing is what defines "good".
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