Loans are everyday life. We take them for a flat, a car or for financing basic household appliances. Simply – thanks to them we can realize our innermost desires. However, when deciding on them, it is worth remembering that the choice of the repayment period has a key impact on the monthly installment and total overheads. And then such a loan becomes more expensive for the sky. Therefore, in order not to be surprised by the final settlements, find out in advance what the actual cost of incurring is.
Interest – the lower the interest rate on the business loan, the lower the interest rate…
It is vain to look for the concept of interest in banking terminology or the Civil Code – although it is a real product that should be taken into account when borrowing. Simply put, interest is a form of payment that the borrower must pay for using a bank or loan offer. Despite their literalness, they depend on the spectrum of factors and apply to both bank and non-bank loans. When calculating them, account should be taken of:
- The type of loan
- Amount of the amount borrowed
- Interest rate
- Loan period
However, to get a good orientation in the total cost of debt, it is worth to read a few key concepts. Here they are!
APY – no move!
APRC, or Actual Annual Interest Rate, determines the total cost of the liability – just on the basis of the calculation of the monthly installments. Each lender or bank is obliged to provide this parameter to the future borrower, before concluding the contract! So APY is the easiest way to compare individual loan proposals. Therefore, it takes into account not only commission, interest rates, but also costs of additional services.
Nominal interest rate – this is not the entire cost of the commitment!
Most often, nominal interest rates are presented in banking offers as tempting and extremely attractive. However, do not be fooled by appearances! It is a payment, which includes: the pure interest rate, the cost of investment risk, as well as the potential inflation rate. In fact, it is the cost borne by the client, and at the same time the remuneration that the bank receives for borrowing money. However, it does not take into account other additional loan fees, such as commission or bank margin!
Knowledge of the above concepts is the first step to understanding how to calculate the actual installment of the loan. Because you must be aware of the fact that you bear not only interest-related costs, but also commission, preparation, administrative or additional insurance.
Interest and penalties – what are they?
- Capital interest – in accordance with art. 359 of the Civil Code, are calculated while using a certain sum of money. Currently, they amount to 5% of capital, and their maximum amount can not exceed 10%. Unfortunately, it often happens that the debtor does not regulate his obligation and in this case, lending companies may demand interest for delay! It is their specific protection against an insolvent customer,
- Statutory interest for delay in repayment of obligations – their aim is to discipline the debtor to repay the borrowed money. They are equally a sanction for failure to make the payment within the set deadline. Therefore, if the contract is not signed, the provisions of the Civil Code are used for the amount of criminal interest. According to them, penalty interest is the sum of the NBP reference rate and 5.5 points. rates. At present, the reference rate remains at – 1.5% – so interest for delay will be 7%.
Therefore, remember that every bank or other financial institution will always demand repayment of the total debt. Simply – interest is an additional source of profit for them. In the Civil Code, there is even a provision that the lender has the right to charge additional penalty interest, even if he has not suffered any financial loss due to a delay, and the whole situation is not the result of the client’s intended action. According to the regulation of the Minister of Justice, they can not exceed 14% in the whole year.
Are interest expired?
At the time of emergence, interest becomes a component independent of the principal debt. They are periodic in nature and according to the regulations, they expire after three years – and this applies to all types of interest! Except when the creditor receives a valid court order to pay interest. Then, their deadline expires after six years! Read also: When the debt expires?
How to calculate interest?
In this case, we have a number of loan calculators available to calculate the amount of the potential installment. However, you will need the following data for this:
- Loan amounts
- Interest rates per annum – that is, the interest rate taken into account along with the bank’s margin
- The loan period
After the calculation, they show not only the value of the total debt, but also how the decreasing installment or the ratio of the capital installment to the interest will change, when choosing the equal installment. Also read: Decreasing or equal installments in a mortgage loan? You can also go to the loan and loan department and ask for a possible simulation of the total loan costs. As a last resort, there is also an option to calculate the amount of installments independently – but this is an extremely complicated matter and it is worth giving it to specialists.
Decide on the loan consciously!
According to the information provided by us – anyone who wants to make a financial commitment must do so with the head and with a lot of caution! Because you must know that by taking a loan or a loan you are forced to pay back the zloty, not only the money you have borrowed, but the interest included in the contract. And with that delay, you get into more and more trouble, because penalty interest does not know pity and usually grow at an alarming rate.
Therefore, a loose approach to the provisions contained in the contract may lead to a financial disaster – especially if you have other obligations to pay off. Also read our guide on how to get out of the debt spiral? thanks to which it can be easier to go straight.