What Is the Annual Cost Rate?
Definition
Annual Cost Rate: The total cost of a consumer loan, with interest, taxes and fees, as a yearly percentage of the loan amount. Also called the annual percentage rate (APR); use it to compare loans.
The annual cost rate shows the total cost of a consumer loan as a yearly percentage of the loan amount. Besides interest it includes the other amounts paid for the loan, such as taxes and file fees. So two loans with the same interest rate can have different annual cost rates. Use it to compare loan offers.
Where it appears in the formulas
It is the yearly rate at which all payments, discounted to the loan date, add up to the loan amount less the fees paid up front: loan amount − upfront fees = Σ payment_k / (1 + ACR)^(t_k), with t_k the time of payment k in years. For a loan with monthly installments, the monthly rate m that does this is found, and ACR = (1 + m)^12 − 1.
In Türkiye
The annual cost rate (yıllık maliyet oranı) is Türkiye’s counterpart of the annual percentage rate (APR). Besides interest it includes KKDF, BSMV and the allocation fee (file fee). The Consumer Credit Contracts Regulation, under Law no. 6502 on Consumer Protection, defines it; its formula is in the regulation’s Annex 1 and counts a year as 12 equal months. The loan calculator computes it from the installments, the allocation fee and the BSMV on the fee; it leaves out insurance and appraisal costs.