Quoted vs real rate
Nominal
APR
EAR
Estimated payment comparison
Nominal payment
APR payment
Gap table
| Scenario | Nominal | APR | Gap | Uplift |
|---|
Gap guide
| Rate gap | Meaning | Band |
|---|---|---|
| < 1.0 point | Quoted rate and real cost are close | Low |
| 1.0 to 3.0 points | Fees or structure materially widen the real rate | Moderate |
| > 3.0 points | The true cost is far above the quoted rate | High |
APR vs nominal rate
Nominal rate is the quoted annual interest rate. APR is the broader borrowing rate that reflects fees and the real cost of credit. When APR is much higher than nominal, the product is more expensive than the headline rate suggests.
Core logic
Rate gap = APR − nominal rate
Relative uplift = (APR − nominal) ÷ nominal
EAR = (1 + nominal ÷ compounding periods) ^ periods − 1
Relative uplift = (APR − nominal) ÷ nominal
EAR = (1 + nominal ÷ compounding periods) ^ periods − 1
Why this matters
Two loans can show the same nominal rate but have very different APRs if one includes higher fees or monthly service charges. Comparing APR against nominal rate makes fee drag visible immediately.
Frequently Asked Questions
What is nominal rate?+
Nominal rate is the quoted annual interest rate before fee drag is considered.
What is APR?+
APR is the broader annual borrowing rate that captures the real cost of the credit product.
Why is APR higher than nominal?+
Because fees, required add-ons and structure can raise the effective cost above the quoted rate.
What does EAR show?+
EAR shows the effective annual rate implied by compounding on the nominal rate.
Do I need loan amount and term?+
No. The calculator can work in rate-only mode, but loan amount and term help estimate cost impact.