24 Hour Loans glossary of financial terms

Applied or Nominal Interest Rate

The rate at which a lender will calculate the interest that is owed on a loan product is not the same as an APR (Annual Percentage Rate). This basic rate is called an applied or nominal interest rate. In certain cases you may also hear it referred to as the real interest rate, the actual rate or the note rate.

This rate reflects the cost of the interest that you will be charged for borrowings at a base level so it will not generally include additional costs such as the charges that will be levied by your lender. It also may not include issues such as compounding or inflation in some cases. So, this rate will, in the majority of cases, be lower than the APR rate that you?re quoted for your borrowings which does include all relevant costs and charges. The APR rate, therefore, tells you exactly what your costs will be on an annual basis whereas the applied or nominal rate will only tell you your interest charges.