Today, many of us use the support of banks when they need cash. However, there is no hope that you will give away as much money as you borrowed. So how much more should be paid to the bank? Can it be counted at all? How do you check the total cost of a loan?
What does the cost of the loan consist of?
A loan, and therefore often simply a cash loan or consumer loan, is the provision of cash for a specified period of time . Today it is in this way that most money is borrowed for sudden expenses. Of course, you must be aware that when reaching for money from a bank or non-bank institution, you will have to pay for it.
Commission and the cost of the loan
So what does the loan or installment loan cost? Most often it is a commission . It is nothing more than a reward to the bank for having granted a loan. The commission can be one-off, and it can be included in the cost of each monthly installment. Importantly, the commission is expressed as a percentage. So it depends on the value of the loan. There is nothing to be deluded that if a bank offers a commission-free loan, it will actually be. Banks and non-bank institutions give nothing for free. So they will certainly compensate for the profit they could have had on the commission. How? For example, adding other fees.
Interest on the loan
The cost of the loan also includes interest. They are calculated on the outstanding debt based on the interest rate set out in the contract. However, it is worth knowing that the maximum amount of interest is limited by law. How to understand? Pursuant to the Act, the limit is calculated based on the reference rate. You can choose two types of interest. Constants and variables . The first does not change during the entire loan period. In turn, the variable interest rate depends on changes in interest rates.
Other credit charges
The cost of credit also includes what installments you choose. You can usually choose equal or decreasing installments, less often increasing installments.
Very often, the cost of credit also includes insurance. The one that will secure the liability in the event of job loss, illness or death of the borrower.
Sometimes the costs of credit should also include fees associated with the use of additional services. Although it is forbidden to require the customer to use them, they often condition the use of some promotion.
How to calculate the total cost of the loan?
And how to calculate the total cost of the loan? A rather complicated mathematical formula serves this purpose. It is definitely better to use the loan cost calculator when you have all the detailed information about a specific offer. The bank must provide all data. Being in their possession, you can easily calculate what costs you have to take into account when deciding on a specific loan.