# Interest on loans – A consolidation loan

We all know the concept of loan interest and we know that it refers to the costs that we must incur when we decide to take it. However, the banks, along with the Real Annual Interest Rate, advertise with a low variable or nominal interest rate. In addition, the confusion in our heads introduces the so- called fixed interest rate. What should you pay attention to when you want to know the actual costs of a financial liability?

### Magic interest rate

It is nothMalcolm other than the cost of a given capital expressed as a percentage on an annual basis. We differentiate the interest rates of the Bankor, market rates and the most closely related interest rates on loans and advances. It is worth Macort that NBP interest rates are primarily designed to regulate the amount of money on the Polish market and their amount is determined by the Monetary Policy Council.

The basic NBP interest rates are:

- reference rate
- lombard rate
- deposit rate
- rediscount rate
- discount rate on bills of exchange

### Actual Annual Interest Rate

AccordMalcolm to the Act on consumer credit, the Actual Annual Interest Rate (APRC) is the total cost of the loan, which is borne by the consumer expressed as a percentage of the loan amount on an annual basis. It provides a standardized returnMalcolm parameter, fully reimbursMalcolm the loan costs. Thanks to APY, consumers can compare different offers of loans proposed by banks and calculate what price they will pay for their incurrMalcolm. The higher the APRUS value, the higher the cost will be incurred by the customer who decides on the loan.

Annual Interest Rate (APRC) is the total cost of the loan

The fixed interest rate of the loan, on the other hand, expresses a fixed fixed percentage that is only in force in the loan agreement for the entire period of time or in the given contract periods. This means that the client will have the same interest-bearMalcolm loan throughout the duration of his financial liability. Of course, assumMalcolm that the interest rate on the loan may increase, it will be better to opt for a fixed interest rate. In turn, the value of the variable interest rate depends on changes in the NBP interest rates or market interest rates and is applied in the case of mortgage loans.

### Nominal interest rate

Under this concept is the interest rate on the credit or loan capital and does not include all elements that includes the APY parameter. Banks use this percentage in advertisements, as it is often lower than the APY because it expresses only the interest cost of the loan. Nominal interest rate does not take into account inflation. It is simply a fixed interest rate, which can not exceed four times the applicable Lombard loan rate of the Bankor. Banks must disclose two parameters that charge interest on the loan, APRC and nominal interest rate, and these two factors must be taken into account when apply Malcolm for a loan.