Annual interest rate

As mentioned, the annual interest rate is the most common way to express interest. With an annual interest rate, you calculate your interest by taking the loan amount and multiplying it by the percentage interest rate on your business loan. The annual interest rate thus indicates how large the cost of the loan is in relation to the loan amount over a year.

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Monthly interest rate

Since the repayment period for business loans is often stated in months, it is common to use a monthly interest rate to express the interest. With a monthly interest rate, the percentage interest rate is expressed per month instead of on an annual basis. If the interest rate on your business loan is stated as a monthly interest rate, you can calculate what the annual interest rate is by multiplying it by twelve. Since the monthly interest rate will always be lower than the annual interest rate, it is important to ensure whether it is the annual or monthly interest rate that is stated when you apply for a business loan to more easily compare offers.

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Nominal or effective interest rate

When you compare business loans, it’s important to consider not only the stated interest rate but also any additional costs, such as set-up or administration fees. The interest rate quoted when you take out a loan is called the nominal interest rate. The nominal interest rate only shows the cost of borrowing money and does not take other costs into account. The nominal interest rate also doesn’t consider whether interest payments are made more than once a year. Comparing loan offers by looking at the nominal interest rate can therefore be misleading, as the total cost of two different business loans with the same nominal interest rate may differ depending on how often the interest is paid and whether there are any additional fees. The effective interest rate takes all additional costs into account and is therefore a better measure when comparing the total cost of different offers.

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For personal loans, the Consumer Credit Act regulates that the effective interest rate must always be stated, but there is no such regulation for business loans, which can make comparison more difficult. Calculating the effective interest rate yourself can be complicated, but you can simplify it by using the formula: effective interest rate = nominal interest rate + fees, to calculate the total cost of the loan.

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What interest rate does Froda offer on business loans?

At Froda, there are never any extra costs in addition to the interest, so you don't need to consider them when looking at the total cost of your business loan. The exact interest rate on your business loan is personal and will be stated in your offer. The interest rate you receive is affected by the amount of money you borrow, the loan term, and your company's creditworthiness. The interest rate on your business loan is fixed but, in exceptional cases, may be adjusted if there are major changes to the policy rate during the loan term or global events that may affect Froda's costs. This is because the policy rate and global changes affect Froda's financing costs, and in the event of major interest rate changes or events that affect the economic situation, we may need to adjust the interest rate in order to continue offering our services. If we need to adjust the interest rate, each loan will be affected individually.

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