What DAE (APR) is and how to compare two loans
Why the interest rate is not enough to compare two offers, what DAE includes and what it leaves out.
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What DAE is
DAE (dobânda anuală efectivă) is the Romanian name for the annual percentage rate, or APR. It is the total cost of a loan, expressed as a yearly percentage: the interest plus the fees and other costs you have to pay to get the loan and keep it.
A bank must show it in every offer and in every advert that mentions a cost.
Why the interest rate is not enough
Two loans with the same interest rate can cost different amounts. The difference comes from:
- the arrangement or analysis fee, paid at the start;
- the monthly fee for administering the loan or the account;
- the insurance the bank requires.
DAE rolls all of them into one figure that can be compared from one bank to another.
An example
You borrow 350,000 lei over 25 years and have two offers.
Offer A: a 5.9% rate and no fees. The payment is 2,234 lei and the DAE is 6.06%.
Offer B: a 5.6% rate, a 5,000 lei arrangement fee and a 60 lei monthly administration fee. The payment is 2,170 lei, 2,230 with the fee, and the DAE is 6.20%.
Offer B has the lower rate and looks cheaper. In total, though, you pay about 4,000 lei more than with offer A. The DAE shows that at a glance: 6.20% against 6.06%.
What DAE does not tell you
- For a variable rate, DAE is calculated as if today's rate stayed unchanged. If IRCC or EURIBOR rise, the real cost will be higher.
- It leaves out late-payment penalties and costs that are not the bank's, such as notary fees.
- Across different terms, DAE figures are not directly comparable. Compare offers for the same amount and the same term.
How to use it
Ask each bank for an offer on the same amount and the same term, and compare the DAE, not the interest rate. Then look at the total amount to repay.
In the payment calculator you can enter the fees and see how the DAE changes.