Whether it's a mortgage, a personal loan, or even a deposit account, almost every financial product shows two different interest figures: the TIN and the TAE. Understanding the difference is the basis for correctly comparing any financial product, not just loans.
What the TIN (nominal interest rate) is
It's the pure interest rate applied to the product's capital, not including fees or other associated costs. It's the figure that determines, together with the term, the basic calculation of the installment via the corresponding amortization formula (in the case of a loan), but it doesn't reflect the real total cost of the deal.
What the TAE (annual percentage rate, APR) is
It's an indicator that, in addition to the TIN, incorporates the rest of the fees and costs associated with the product (opening fee, appraisal costs, insurance mandatorily tied to the product in certain cases), expressing the real, standardized cost (or return, for savings products) in annual terms, which allows comparing products with different cost structures on an equal footing.
Why on a loan the APR is almost always higher than the TIN
In a financing product, the more fees and additional costs the product has, the bigger the gap between TIN and APR: a loan with no additional fees at all can have an APR very close to its TIN, while a loan with an opening fee and other associated costs will have an APR notably higher than the advertised TIN, reflecting that extra cost.
In savings products, the logic runs the other way
In a deposit or interest-bearing account, the APR can differ from the TIN mainly due to the effect of how often interest is compounded (whether it's paid monthly, quarterly, or annually), with the APR potentially being slightly higher than the nominal TIN if compounding happens more often than annually, reflecting the effect of compound interest within the period itself.
Why you should never compare products based on the TIN alone
Comparing two loans or two mortgages by looking only at the TIN, without considering the fees and costs that make up the APR, can mistakenly lead you to choose the product with the higher real total cost, simply because its advertised TIN looked more attractive at first glance.
The APR is mandatory under transparency regulations
Precisely because of its importance for comparability, consumer protection regulations require lenders to clearly display the APR in the advertising and pre-contractual documentation of their financial products, a figure you should always look for before paying attention to any other advertised interest rate.
Always compare using the full APR
Our personal loan calculator and our mortgage calculator calculate the real APR of your transaction, factoring in fees and costs, so you always compare using the correct figure.