## What is the effective interest rate and what can you use it for?

It is important to be able to assess payday loans as well as instant loans and their comparability! If you want to borrow money quickly online, then you should know exactly what interest rates are offered. The prerequisite is to understand the different forms of interest. In 2-minutes all interest forms are explained.

### Recognize the importance of effective interest!

First, you will find the so-called effective interest rate. This is also very often written in the payday loan as an effective annual interest. You can also find this formulation in credit cards. The effective interest includes all costs incurred in the loan. All costs plus the annual interest rate thus yield the effective interest rate. This makes it easier to find a comparison of offers!

So you are aware that there are additional costs for most loans. And these additional costs are automatically included in the annual percentage rate and are found in almost all money transactions where you want to borrow money. That means if you want to take out a loan and you want to compare payday loans with a loan calculator, then you should also be aware of this fact.

Again, to define it clearly. The effective interest also includes all incidental costs. So if you want to make a comparison of loans and use a loan calculator on the Internet then you can use the effective interest rate to compare all actual costs.

### What is the nominal interest rate?

In contrast to the so-called effective annual interest, you will also find the name of a nominal interest rate. The nominal interest rate, in contrast to an annual percentage rate of charge, does not include any ancillary costs. This means that a bank can also make a bid with a really super-low nominal interest rate and subsequently causes high ancillary costs. That is also so if you want to borrow money at short notice!

Therefore always try to pay attention to all offers on the Internet and also in the Verwednug of a loan calculator the effective interest rate!

### What is the debit interest?

At the nominal interest rate and the effective annual interest rate, there is also the so-called borrowing rate. This is also known as loan interest or active interest. The difference is obvious. The debit interest is the interest rate that relates to your borrowed amount. So if you have a borrowing rate of 4% annually agreed then this borrowing rate is a fixed amount you have to pay as a borrower over a period of time with monthly installments.

The monthly installment is the amount that the borrower has to pay as a due installment to settle his debt within the agreed loan term! I always miss reviews from borrowers. Of which you can also gain information that can help you to get cheap payday loans!

### Representative interest rate and its use

The loan calculator that you usually find on the internet, work with an interest rate which is used without your credit rating and without your personal data for the calculation. This representative interest rate is prescribed by law. This is for consumer protection to make a better comparison possible!