Home Retail banking Customers Credits & loans Consumer credit : France adopts the european method for calculating the annual percentage rate (APR)  


21 may 2003

Consumer credit : France adopts the european method for calculating the annual percentage rate (APR)

The adoption at a European level of a standard formula for calculating the Annual Percentage Rate (APR) on consumer loans is the first step towards harmonisation.


Nevertheless, French banks would like to go a step further in order to enable true comparisons. The components of the APR still vary from one country to another, but are the most complete in France. The APR applied by French banks is therefore a clearer, more accurate indicator of the cost of credit to the consumer, but can also give the false impression that it is higher than in other European countries.

What is the APR?

The Annual Percentage Rate is a formula that expresses the total cost of a loan as a single interest rate.

The components of the APR (interest rate + insurance + sundry fees) are regulated in France. They vary between countries across Europe, thus making comparisons difficult.

A mathematical formula is used to calculate the APR precisely. To date, France, Germany and Finland are the only countries that use the same formula.

The European APR directive

This directive, which was adopted in 1998, aims to harmonise the method of calculating the APR in all Member States of the European Union by defining a single formula.

As of July 1 st 2002, French banks have been required to use the new European formula, which applies solely to consumer credit in the form of a loan or overdraft, regardless of the amount or duration.

This new directive does not apply to mortgage loans and loans to self-employed professionals and businesses.

The new calculation method does not change the cost of credit

It is merely a different presentation of the formula, i.e. the decision to use a "common language" for all countries of the European Union, without any impact on the price effectively paid.

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