APR What is it and how to calculate it?

At Homes by Gestilar, as a leading proptech when it comes to transforming properties into profitable opportunities in Spain, we are well aware that making smart financial decisions requires a solid understanding of certain key terms and concepts. One of these concepts is the APR (Annual Percentage Rate), a figure that plays a fundamental role in the world of finance, particularly in products such as loans, mortgages and credit cards. We are going to explore it in detail with this guide, with which you will discover what it is and how to calculate it, what its importance is in the evaluation of financial products and why it is a strategic ally in the House Flipping environment.

What is the APR

The Annual Percentage Rate is a financial indicator that reflects the total cost of a loan or financial product over a year. Unlike the NIR (Nominal Interest Rate), which only considers the pure interest without taking into account other expenses, the Annual Percentage Rate incorporates not only the interest, but also commissions, insurance and other costs associated with the product.

What is the difference between NIR and APR?

The main difference between the NIR and the APR lies in the inclusion of other costs. While the NIR focuses on the basic interest, the APR takes into account all the costs that the consumer will face during the term of the product. In short, the APR shows the net interest, while the APR gives a more complete and realistic picture of the total cost.

How to calculate the APR

The calculation can be complex, but the general formula is based on the idea of equalising cash flows over the year. This formula involves variables such as initial principal, interest, fees and the term of the loan. Thus, we could take this as the simplified formula for the Annual Percentage Rate:


  • r is the periodic rate of interest (usually annualised) expressed as a decimal.
  • n is the number of periods, usually expressed in years.

To calculate the Annual Percentage Rate of Charge for a personal loan, for example, the Bank of Spain itself offers this simulator which can be very useful.

APR, how to calculate interest

In calculating the Annual Percentage Rate, we must take into account the interest. In addition to the NIR, we must consider fees, insurance and down payments. By incorporating all these elements into the equation, the APR provides a more accurate picture of the real cost of the financial product.

Where should the APR appear?

The Annual Percentage Rate should be clearly and prominently displayed on all financial products subject to this rate (such as mortgage loans, credit cards and personal loans).

The APR is an essential tool to understand the full financial impact and to enable consumers to compare different offers and make informed decisions.

NIR and APR: what to look out for?

When evaluating financial products, both the NIR and the APR are important. The APR reflects the basic interest rate, while the APR provides a more holistic view of the total cost, as we have seen. While a low APR may seem attractive, it is vital to also take into account the APR in order to have a full understanding of the costs associated with the product. Only then will we know if we are making a good decision.

Which products have an Annual Percentage Rate of Charge?

The APR is applicable to a wide range of financial products. In addition to loans and credit, products such as mortgages, credit cards and instalment finance are also subject to the APR. In all these cases it plays a key role in allowing consumers to compare different options in a rigorous manner.

The annual percentage rate of return on residential property sales: a strategic approach to assessing costs and profitability

In the dynamic House Flipping scenario, with Homes by Gestilar as a leading proptech in Spain, the Annual Percentage Rate becomes a strategic pillar. Beyond the NIR, the APR gives us a complete perspective when considering interest, commissions and other expenses over the course of a year.

At Homes by Gestilar we stress the importance of understanding the APR to accurately evaluate transactions and make informed decisions, as it:

  • It provides clarity on profitability. In the House Flipping environment, where every investment counts, the APR is an essential tool for calculating real interest rates and assessing the total cost of financing. It is what tells us whether a transaction is financially viable.
  • By knowing it, we can maximise results. More than a financial indicator in House Flipping, where decision time is crucial, APR becomes a strategic ally.

Before making a financial decision, take into account the Annual Percentage Rate of Return to base it on solid data and do it intelligently. At Homes by Gestilar, as a proptech expert in House flipping, we help you transform the purchase and sale of properties into successful opportunities with maximum profitability.