Krediidikulukus

Krediidikulukus, in Estonian, refers to the cost of credit and is commonly presented as the annual percentage rate (APR) of a loan. It expresses the true yearly cost of borrowing a particular amount, enabling consumers to compare different credit offers on a like-for-like basis.

What is included and how it works: Krediidikulukus encompasses the interest rate and all mandatory charges tied to obtaining the credit, such as arrangement or service fees and any insurance that the borrower is required to pay as part of the loan. It is designed to reflect the total amount payable over the life of the credit. Optional products or services that are not obligatory for the loan generally do not have to be included in the APR.

Regulatory context: In Estonia and across the European Union, the krediidikulukus is required to be disclosed in consumer credit offers and agreements. The EU directive on consumer credit (Directive 2008/48/EC) standardizes how APR is calculated and presented, promoting transparency and comparability. Estonian financial supervision authorities oversee compliance with these rules.

Purpose and use: The primary purpose of the krediidikulukus is to help consumers assess the overall cost of credit beyond the nominal interest rate. By expressing the total cost as a single annual rate, borrowers can more easily compare different loan products, fees, and repayment schedules, and make more informed borrowing decisions.