What Is APR and Why the Interest Rate Isn't Everything
Banks advertise loans "from 18%", but the real cost is often much higher. APR — the full cost of credit — is the only metric that tells the complete story.
Banks advertise attractive interest rates — "loans from 18%". But beyond the rate lie fees, insurance premiums, and service charges that significantly raise the real cost. That's exactly what APR was designed to capture.
What Is APR
APR (Annual Percentage Rate), known as PSK in Uzbekistan, is a standardized measure that captures all mandatory borrowing costs: the interest rate, origination fees, required insurance, account maintenance, and any other obligatory charges.
Unlike the nominal interest rate, APR reflects what you actually pay.
Banks are required to disclose APR before you sign a contract. If a bank refuses or hides it in fine print — consider it a red flag.
What Goes Into APR
Optional add-ons — SMS notifications or extended insurance — are not included in APR. Only costs you cannot decline count.
- Nominal interest rate — the primary component
- Origination fee — typically 1–3% of the loan amount, charged upfront
- Monthly account maintenance or service fee
- Mandatory insurance (life, unemployment, or collateral)
- Any other obligatory payments specified in the contract
A Real Example
Loan: 5,000,000 UZS for 12 months at 20% annual interest.
The contract also includes: a 2% origination fee (100,000 UZS) and a 1% annual insurance premium (50,000 UZS).
| Cost Component | Amount |
|---|---|
| Interest at 20% | ≈ 545,000 UZS |
| Origination fee (2%) | 100,000 UZS |
| Insurance (1%/year) | 50,000 UZS |
| Total cost | ≈ 695,000 UZS |
| Real APR | ≈ 27.8% |
Instead of the advertised 20%, the true cost is nearly 28% — a gap of 7.8 percentage points that adds up fast on larger loan amounts.
How to Compare Loans Properly
A slightly higher rate at one bank may be more than offset by lower fees at another. APR is what cuts through the marketing noise.
- Always request APR from every bank — not just the interest rate
- Compare offers using APR only — it's the only apples-to-apples metric
- Verify what's included: fees, mandatory insurance, service charges
- Use an APR calculator to independently verify the bank's figures
Related calculator
APR Calculator