How are the credit costs at banks calculated
Credit and loan costs
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In addition to interest, loans and credits can incur other costs. Some can be avoided - or at least reduced.
The real consideration for a loan or loan is that interest. They form the main cost factor. The debit interest (nominal interest) required by the bank depends, among other things, on the market situation, the loan itself, the creditworthiness of the borrower and, of course, the credit institution. There are loans with fixed and variable borrowing rates.
However, other factors also flow into the specific costs to be paid, such as the exact repayment conditions or any discounts and fees. In addition to the debit interest, consumer loans must therefore also show the effective annual interest rate, which quantifies the annual direct costs for a loan or a loan (as a percentage of the loan amount per year). This should make it easier for consumers to compare offers. If the interest rate or other cost-determining factors change over the term, the initial effective annual rate indicated.
In the case of larger credits or loans, a discount or deduction is sometimes withheld: the bank does not pay out the full loan amount, but keeps a percentage of it. The discount serves as an interest prepayment, which reduces the later interest burden. However, it also increases the amount of credit required, which must be taken into account when borrowing. Corresponding discounts must be quantified separately as well as included in the annual percentage rate.
This also applied to processing fees - but banks are no longer allowed to charge them after a ruling by the Federal Court of Justice.
Additional loan costs: Be careful here
In addition, there may be indirect additional costs for credits and loans Not must be shown in the effective interest rate. In the case of consumer contracts, these costs (in addition to debit interest and effective interest) must also be listed in the contract.
These include, for example, account management fees for loan accounts, which by no means all banks charge - if they are, they are often negotiable. Provision interest (e.g. for mortgage lending) also counts separately because it is legally an additional service and not interest in the true sense of the word.
Life or residual debt insurance, which is used to secure credits or loans, can also incur costs that should not be underestimated. If the lender makes this collateral mandatory (e.g. for construction and real estate loans or loans without a credit check), the costs must be shown in the effective interest rate.
If the insurance is voluntary, however, the costs are extra. Banks are also happy to collect additional commissions here. It is therefore often cheaper to take out appropriate insurance directly with an insurance company, if necessary, than through the lending bank. Alternatively, claims from an existing life insurance policy can be transferred to the lending bank for collateral purposes. However, this is only advisable if it does not result in an insurance gap for the relatives.
Read on: What is Consumer Credit?
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