Effective annual interest rate and the consumer credit interest rate cap 2026

Nominal interest rate or annual percentage rate?

The nominal interest rate is the interest calculated on the loan principal. The annual percentage rate of charge, in turn, expresses all the costs of the credit as an annual percentage: in addition to interest it includes, for example, opening fees, account maintenance fees, commissions and other mandatory costs. According to European Union consumer advice, the annual percentage rate is intended precisely for comparing offers from different lenders.

Two loans can look equally priced even though one is clearly more expensive. If the loans have the same nominal interest rate but one has an opening fee and a monthly account management fee, its real annual percentage rate is higher. Fees weigh especially heavily on small and short loans, because they are spread over a small principal and a short period.

Where can you find the effective annual rate?

Before the agreement is signed, the lender must give you the standard European consumer credit information. The form shows the main terms of the credit, the amount and costs, the annual percentage rate of charge, and the number and size of the instalments. If you have not received the form, you can ask for it.

Always compare offers with the same loan amount and loan term, because the real annual interest rate changes if the amount or term changes. Also look at the total cost of credit in euros: it tells you how much you pay back in total.

Interest rate cap on consumer credit in 2026

Interest on consumer credit is limited by the interest rate cap in the Consumer Protection Act. Since October 2023 the cap has been 15 per cent plus the reference rate under the Interest Act, but no more than 20 %. According to the Bank of Finland, the reference rate is 2.5 % for 1.7.–31.12.2026, so the interest rate cap for this period is 17.5 %.

In addition to interest, other credit costs are limited separately: they may be no more than 0.01% of the credit amount or credit limit per day and no more than €150 per year. The cap does not apply to credits secured by housing or to hire-purchase of vehicles. If the lender breaches the cap, no interest or other credit costs may be charged at all.

An interest rate cap does not mean that credit below the cap is cheap. The interest on consumer credit can be many times that of a home loan: according to the Bank of Finland, the average interest rate on new home loans in August 2026 was 3.35%. Therefore always compare the total cost of credit in euros.

Reference rate 1 Jul–31 Dec 2026: 2.5%
Interest rate cap for the same period: 17.5%
Other charges: at most 0,01 % per day and 150 € per year
The new reference rate enters into force on 1.1.2027

Cancellation and early repayment

A consumer credit agreement can be cancelled without reason within 14 days of concluding it. The credit is then repaid together with interest for the period of use and any costs the lender does not refund. The credit can also be repaid before the agreed date. The lender may charge compensation, but it may not exceed the interest that would have accrued over the remaining period.

What changes on 20.11.2026?

The implementation of the EU's new Consumer Credit Directive amends the Consumer Protection Act. According to the government proposal (HE 120/2025 vp) and the Economic Affairs Committee's report, from 20.11.2026 interest-free and cost-free credits, such as many buy now, pay later payment methods, will come within the scope of consumer credit regulation. The lender must document the creditworthiness assessment and carry it out also when a credit limit is raised. If the assessment is neglected, the consumer does not have to pay interest or other credit costs. The changes apply to contracts concluded after entry into force.

Before you sign

Loan Radar compiles up-to-date reference rates, the interest rate cap and average loan rates. If debts have already grown out of control, free help is available from financial and debt counselling.

Ask each lender for the standard European consumer credit information.
Compare the real annual interest rate and the total cost of credit in euros for the same amount and term.
Check whether the interest rate is fixed or variable.
Calculate whether the monthly instalment fits the budget even when other expenses rise.

Frequently asked questions

What does the effective annual interest rate include?

In addition to interest, all mandatory costs of the credit, such as opening and account management fees, as an annual percentage. That is why it is a better figure than the nominal interest rate for comparing offers.

What is the interest rate cap on consumer credit in 2026?

1.7.–31.12.2026 the interest rate cap is 17,5 %, i.e. the reference rate of 2,5 % plus 15 percentage points. The cap is, however, never more than 20 %.

Can a consumer credit be cancelled?

Yes, within 14 days of concluding the contract without giving a reason. The credit is repaid with interest for the period of use.

Does the interest rate cap apply to home loans?

No. The interest rate cap does not apply to credits secured by housing or to instalment sales of vehicles. It applies to other consumer credits, such as payday loans, flexible credits and credit cards.

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Sources

The article is general information and does not replace the guidance of an authority, a lawyer or an adviser. Check up-to-date information from the sources.