By Gabriele Denaro · 1 October 2026
The nominal rate (TAN in Italy) is a loan's stated interest rate. The APR (TAEG in Italy) is an indicator of the overall cost of credit, as an annual percentage: it includes interest and the relevant costs and charges, but not necessarily every possible expense. To compare two loans you look mainly at the APR. On unpaid debt, accrued interest can be added to the principal and itself earn further interest.
On a variable-rate mortgage the instalment can change as a reference rate (for example Euribor) moves; on a fixed rate it stays as agreed. With "French" amortisation the periodic instalment is generally constant, but its makeup changes: at the start it is mostly interest, then the capital share grows.
With a charge card you pay the full amount at the end of the period; with a revolving card you spread the balance and pay interest on what remains, and paying only the minimum greatly lengthens repayment. Italy's "cessione del quinto" is a loan for employees and pensioners repaid by direct deduction from salary or pension, with an instalment normally no more than one fifth of net salary or pension. A guarantor is someone who commits to paying if the borrower does not.
Repaying a loan early generally reduces future interest, but any fees and the contract terms need checking. Debt consolidation merges several debts into one loan, often with a more manageable instalment: it pays off only if the overall cost does not get worse.
With several debts, the "avalanche" strategy pays off the highest-rate ones first and saves more interest; the "snowball" strategy starts with the smallest to build psychological momentum, even though mathematically it is less efficient. If you have a 15% debt and an account earning 2%, looking only at interest, repaying the debt wins, while still keeping an emergency fund.
"Good" debt is aimed at building wealth (for example a mortgage to buy a home), "bad" debt finances spending that does not raise net worth. In general, borrowing makes sense for real needs or for investments that may increase wealth over time, after checking that the instalment is sustainable.
A credit score summarises your creditworthiness and is used by banks and lenders to assess risk. As rules of thumb, people cite using only part of your available credit limit and keeping your debt-to-income ratio low: thresholds like 30% or 36% are rules of thumb, not legal limits. The anti-usury threshold is the limit, calculated under the law, above which the cost of credit may be considered usurious.
General educational information, not personal financial, tax or legal advice. It may be incomplete or out of date. Terms of use.