Effective rate calculator
Compare two loans with the same amount and term. The calculator counts the fees and shows which costs less in total.
Compare two loans
Loan A is SEK 307 cheaper in total.
The fees decide
In the example loan B has the lower nominal rate, 7.90% against 8.90%, but a SEK 495 setup fee and a SEK 45 notice fee each month. The effective rate is 9.43% for loan B and 9.27% for loan A.
That is why we always compare the effective rate and the total, not the nominal rate.
How the effective rate is calculated
The effective rate is the yearly rate that makes all the payments on the loan, fees included, worth the same as the amount paid out to you. Lenders must calculate it this way under the Swedish Consumer Credit Act and show it in the representative example. The calculator works the same way.
Interest is paid every month, so the monthly rate is converted to a yearly rate with compound interest. That is why loan A, at 8.90% with no fees, has an effective rate of 9.27%.
The fees are then added to the payments: the setup fee to the first one and the notice fee to every month.
SEK 100,000 over 5 years.
| Part | Rate |
|---|---|
| Nominal rate per year | 8.90% |
| Per month, one twelfth | 0.742% |
| As a yearly rate with compound interest | 9.27% |
| With a SEK 500 setup fee | 9.50% |
| Also with a SEK 25 monthly notice fee | 10.06% |
The same fee weighs more on small and short loans
A setup fee is a fixed amount. On a small loan it is a larger part of what you borrow, and over a short term it is spread over fewer years. Both push the effective rate up.
Without a fee the effective rate is 9.27% for all four loans, because the rate is the same. The notice fee works the same way: SEK 25 a month is SEK 300 a year, which is 3.0% of SEK 10,000 but 0.2% of SEK 150,000.
8.90% nominal rate, SEK 500 setup fee, no notice fee.
| Loan | Fee as share of loan | Effective rate |
|---|---|---|
| SEK 10,000 over 1 year | 5.0% | 20.19% |
| SEK 50,000 over 3 years | 1.0% | 10.01% |
| SEK 100,000 over 5 years | 0.5% | 9.50% |
| SEK 150,000 over 10 years | 0.3% | 9.36% |
Compare at the same amount and term
The effective rate depends on the amount and the term, not just on the rate and the fees. Two effective rates therefore show which loan costs less only when they are calculated for the same amount and term. The calculator does that, and for the same reason the effective rate in a representative example applies only to that example's amount and term.
The effective rate is also a cost per year. In the table the loan is the same. With a longer term the effective rate falls, mainly because the setup fee is spread over more years, but the total rises by SEK 104,381 from 3 years to 15 years, because you pay interest for longer. A lower effective rate over a longer term can therefore mean that you pay more in total.
SEK 150,000, 8.90% nominal rate, setup fee SEK 500, notice fee SEK 25/month.
| Term | Effective rate | Total to repay |
|---|---|---|
| 3 years | 9.91% | SEK 172,867 |
| 5 years | 9.80% | SEK 188,389 |
| 10 years | 9.69% | SEK 230,543 |
| 15 years | 9.64% | SEK 277,248 |
Common questions about the effective rate
What is the difference between the nominal and the effective rate?
The nominal rate is the interest on the loan itself. The effective rate also counts the setup fee and the notice fees and shows what the loan costs per year. The effective rate is the one to compare.
Which fees are included in the effective rate?
The interest and the fees that come with the loan, such as the setup fee and the notice fee. Costs that arise only if you pay late, such as reminder fees and late payment interest (dröjsmålsränta), are not included. In the calculator you enter the fees for both loans yourself.
What does representative example mean?
It is the worked example that must appear wherever credit is marketed with an interest rate, under section 7 of the Consumer Credit Act (konsumentkreditlagen). It shows the rate and fees, the amount of credit, the term, the effective rate, the total to repay and the amount of each payment. Kreddo shows such an example with the loans in the comparison.
What is a good effective rate?
There is no level that applies to every loan. The rate depends on the type of loan, the amount and the term, and the lender sets it after a credit assessment. Among the lenders we compare, personal loans start at 4.57% effective rate, and quick loans and credit lines are at 9.7–204.9%.
When does credit count as high-cost credit?
When the effective rate is at least the reference rate plus 30 percentage points, today 32%. Of the 29 loans and credits we compare, 6 are above that line.
Does the effective rate apply to the whole loan?
It is calculated as if the rate and the fees stay the same for the whole term, as the calculation rules require. At a variable rate the rate can change during the loan, and then both the monthly cost and the effective rate change.
Is there a cap on the rate?
Yes. The nominal rate on consumer credit in Sweden may not be higher than 22.00%, the reference rate plus 20 percentage points.
Is the result an offer?
No. The calculator works with the rates and fees you enter. The lender decides which rate you get after a credit assessment. Kreddo is a comparison service and does not lend money.