What is the NIR and the APR
When a person decides to apply for a bank loan to buy a property, there are two essential things to take into account: the NIR and the APR.
The Nominal Interest Rate (NIR), which is the price paid for the loan, and the Annual Percentage Rate (APR), which covers commissions, the duration of the operation and the NIR of the loan to be applied for.
There are many fields that affect the NIR and the APR within a loan or mortgage operation. Therefore, in the following, we will know all the details in detail.
What is the difference between NIR and APR?
The first thing is to differentiate between what the NIR means and what it has to do with the APR. As already specified, the Nominal Interest Rate or NIR is the price paid for a loan, i.e. the specific percentage of the total amount lent by a bank.
Normally, this same percentage amount is calculated on a monthly basis and must be included in any banking product contract, whether loans, deposits, credits or mortgages.
On the other hand, the Annual Percentage Rate or APR is made up of many other variables, including the NIR itself, as well as possible bank fees associated with the costs of the operation being carried out, a cancellation or amortisation, or the arrangement fee, among others.
However, it is worth noting that the APR does not include notary fees, insurance or other charges. It is obtained from a mathematical formula generally established for three types of financial products: savings, personal loans and mortgages.
For example, if 200,000 euros are requested in a transaction with an APR of 1%, the loan will actually have a total amount of 202,000 euros, as this is what must be
paid back to the lending bank. The APR is therefore only an indicator of the annual interest rate and fees.
In contrast, the Nominal Interest Rate is usually presented in the loan contract itself, although, it is important not to overlook the fact that it appears independently, and that it is part of other concepts such as expenses and associated commissions.
Taking out a loan on the Costa del Sol
Perhaps the time has come to take out a mortgage loan. On the Costa del Sol it is very common to come across the terms APR and NIR when purchasing a property.
And it may happen that both acronyms are not too familiar. In view of this, before we begin, it is important to clarify that, when evaluating various real estate offers in Marbella, it is not only the NIR that should be taken into account, but also the APR.
As we said, the NIR is a monthly period and the APR is annual. The first is merely informative and does not include expenses or commissions, while the APR provides much more extensive and detailed information.
Which is more important for the consumer?
Between the two options, the truth is that the Annual Percentage Rate of Charge (APR) is more important for the consumer because it includes the Nominal Interest Rate itself plus other data that provide a clearer view of what a loan will cost, or the full amount of a specific investment.
Therefore, the APR is what users are really interested in to know whether the loan conditions offered by the financial institution are the most appropriate, and thus to be able to weigh up the different offers.
