TAEG (Tasso Annuo Effettivo Globale)

The Annual Global Effective Rate, essentially the Italian term for Annual Percentage Rate (APR) of a loan. It represents the total cost of credit on a yearly basis, including nominal interest (TAN) plus fees, expressed as a percentage. Lenders must disclose the TAEG for mortgages and consumer loans . For example, a mutuo might have a nominal interest of 2% but with arrangement fees, insurance, etc., the TAEG might be 2.3%. The TAEG allows borrowers to compare different loan offers comprehensively. In Italian practice, TAN (nominal rate) plus spread etc. is talked about for interest, while TAEG includes things like appraisal fee, preliminary investigation fee, mandatory insurance if any, and known periodic costs. It assumes the loan runs full term. If a mutuo has variable rate, the TAEG is based on initial rate but will change with fluctuations. The term ISC (Indice Sintetico di Costo) is also used interchangeably with TAEG in some documentation. In summary, TAEG is the benchmark of the loan’s total annual cost – the lower the better for the borrower. Not to be confused with TAN (Tasso Annuo Nominale) which is just the interest rate without fees.