Everyday money · Jurisdiction DE

Effective annual rate / PAngV (Germany)

This is German price-indication law (PAngV), not a UK APR label. Lenders offering consumer credit must state the effective annual interest rate. It helps you compare. It is not a grade and not a Finmon recommendation of which offer to take.

In more detail

Under PAngV section 16 the effective rate includes debit interest and certain known costs, such as brokerage. Not everything is inside: default charges are out, and so are costs for insurance such as payment protection when it is not required to get the loan. A lower effective rate with a much longer term can cost more in euro. Compare similar amounts and terms, not the monthly instalment alone.

Background

The formula is in the PAngV annex (present-value equality of drawdowns and repayments). Ads that quote rates must show the effective rate at least as prominently as other rates and use a representative example (section 17). For overdraft facilities under Civil Code section 504 (2) that cost nothing beyond debit interest and have an interest period of at least three months, section 18 requires the annual debit rate instead of the effective rate. Finmon’s loan calculator may ignore fees. The model is not a PAngV certificate.

An example

Offer A: 4.9% effective, 36 months. Offer B: 4.2% effective, 84 months, same net loan. The lower effective rate does not mean B costs less interest in euro. German PAngV helps comparison; it does not finish it.

A common misconception

The smallest monthly payment or the smallest effective rate is legally the best offer.

German PAngV makes the effective rate comparable. Term and excluded costs still need a separate look. Finmon picks nothing.

Source: PAngV § 16 · gesetze-im-internet.de. Last reviewed: 2026-10-31. Editorially reviewed on 2026-10-31. Next review 2027-10-31. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.