Annual Percentage Rate (APR) Calculation

What is the Annual Cost Rate (Effective Interest) of a Loan? How is it Calculated?

Know this rate to see the real cost when taking a loan.

The annual cost rate of a loan, also known as the effective interest rate, shows the real cost of a loan, taking into account not only the interest but also all fees such as insurance, file fees, Resource Utilization Support Fund (KKDF), Banking and Insurance Transactions Tax (BSMV), allocation fees, etc.

In this guide, we will cover:

• What the annual cost rate is

• Why it matters

• How it is calculated

• Which fees are included

💡 Want to calculate it now? Use our Loan Annual Cost Rate Calculator at the top of the page to see the real cost in seconds!

What is the Annual Cost Rate (Effective Interest)?

The annual cost rate is the percentage of the total cost you pay when taking a loan, calculated annually based on the loan amount.

This rate includes all additional fees and charges, not just interest. Therefore, it is the most accurate criterion when comparing offers from different banks.

Why is it Important?

A loan with a low interest rate may actually be more expensive due to high fees. Knowing the annual cost rate helps you:

• Compare offers from different banks

• Understand the real cost of the loan

• Make more informed financial decisions

Which Fees Are Included?

The annual cost rate considers the following fees:

• Interest

• KKDF (Resource Utilization Support Fund)

• BSMV (Banking and Insurance Transactions Tax)

• File fees

• Allocation fees

• Mandatory insurance (life, car, earthquake, etc.)

• Appraisal fees

• Mortgage and other related fees

💡 Tip: For mortgages, KKDF and BSMV are often exempt.

How is the Annual Cost Rate Calculated?

The true effective interest rate is calculated using the internal discount method.

For a simplified calculation:

1. Calculate the total repayment amount

2. Subtract interest and fees

3. Convert this total into an annual rate based on the loan amount and term

Example Calculation:

• Loan Amount: 50,000 TL

• Term: 60 months

• Annual Interest Rate: 2.75%

• Total Fees: 1,500 TL

In this case, the annual cost rate may be approximately 5.50%.

Difference Between Monthly and Annual Cost Rate

• Monthly cost rate: The cost of the loan for 1 month

• Annual cost rate: The total cost accumulated over 12 months

Banks usually quote the annual rate.

Frequently Asked Questions (FAQ)

🔹 Is the annual cost rate mandatory?
Yes, banks are required to disclose it under the Consumer Protection Law and Banking Regulation and Supervision Agency (BDDK) regulations.

🔹 Is the effective interest rate always the same?
No, it varies depending on the loan type, term, fees, and interest rate.

🔹 How can the cost rate be reduced?

• Choose loans with lower fees

• Longer terms may sometimes be advantageous

• Borrowers with higher credit scores can get lower rates

🔹 Are fees added to the loan amount?
Yes, some fees are added to the loan amount and included in the installments.

Conclusion: Pay Attention to the Annual Cost Rate When Choosing a Loan

Focusing only on the interest rate can be misleading. The annual cost rate (effective interest) is key to understanding the real cost of a loan.

🏦 Warning: This calculator is for informational purposes only. For exact details, consult your bank.