Full loan cost

One of the main parameters affecting the choice of a client when applying for a loan is the interest rate set by the bank.

However, in addition to the interest rate for the use of borrowed funds, in most cases there are other costs arising from obtaining and using a loan.

How to calculate which loan is really more profitable? For this, the full cost of the loan is used, it helps you  objectively compare the profitability of a particular loan.

For our clients, we always calculate the full cost of the loan, since it reflects the real cost of borrowed funds.

The total cost of a loan or loan is an interest rate in reliable, annual and effective terms, the calculation of which takes into account the payments of the borrower associated with obtaining a consumer loan or loan.

What payments of the borrower are included in the calculation of the total cost of the loan?

a) on principal and interest;

b) in favor of the lender bank, if the borrower's obligation for such payments follows from the terms of the agreement and (or) if the issuance of a loan or loan is made dependent on such payments;

c) in favor of third parties, if the obligation of the borrower to pay such payments follows from the terms of the agreement, including payments:

- in favor of the insurance organization, if the bank acts as the beneficiary under the insurance contract in the event of an insured event;

- in favor of insurance organizations when insuring the subject of pledge under a pledge agreement that secures the client's obligations under the agreement and is in the use of the pledger.

- to the appraiser for the appraisal of the pledged property.

 

Loan term (months)

12

Loan amount (sum)

1 000 000,00

Rate (per annum)

26,9%

Monthly payment*

95 968,00

Effective rate

26,9%

* With subsequent monthly decrease

 

On the example of other types of loans, the total cost of the loan may differ depending on the presence or absence of additional costs for registration of pledge, etc.