AAR (or Annual Percentage Rate of Charge), is a percentage rate and represents the total cost of a loan. 😉

It is often used in an attempt to compare two credits. 

It can often be useful, but it's good to understand more about the following factors that influence its value. 🙂

Costs included in the EAD

Some banks choose not to include costs of life insurance in the APR. 😅

Also:

➤⠀the management fees of current accounts are not usually included in the AED;

➤⠀so does insurance for real estate provided as security. 

How costs are charged 

As you know, some banks charge fees and charges at the time of granting credit, while others charge them as you go along. 📆

It's important for you to know how much money you need to have when you take out a loan.  

Let's see an example 

➤⠀at bank X, a loan may have an analysis fee of 300 lei and another 5 lei monthly for 60 months (total 600 lei);

➤⠀at bank Y, a loan can have an analysis fee of 600 lei and 0 monthly administration fee. 

In both cases, the amount payable is the same, 600 lei. However:

➤⠀at the time of the loan from bank Y, you should have 600 lei in your current account;

➤⠀when, for the one at bank X, you would only need 300 lei in your current account (i.e. the amount represented by the analysis fee).

❗⠀If you want to know more information about the terms used in lendingwe also have a whole guide on our website where we tell you all about them.