The “Make Sense of Money” financial education campaign: the annual percentage rate of charge
Automatically translated summary. The full text is available in Romanian.
As part of the financial education campaign “Make Sense of Money”, this note explains how to choose a loan. It shows how the effective annual interest rate (DAE) lets borrowers compare credit offers that lenders present in different ways, using a hypothetical MDL 1,000 loan.
In the example, a one-year MDL 1,000 loan, repaid from the second month, comes with three offers: a monthly payment of MDL 100 (DAE = 42%), a 10% annual interest rate with no other fees (DAE = 10.47%), and 0% interest with a 2% monthly administration fee (DAE = 26.8%). The second has the lowest DAE and is the most advantageous.
DAE covers all payments on a loan as an annual percentage of its value, excluding penalties. It applies to all credit products, and the law requires lenders to state it in advertising and before the contract is signed. It is not the same as the interest rate. Borrowers should request it if missing, seek help from a friend or relative if unsure, and compare only similar products in amount and term.
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