Conditions and expenses
April 18, 2019
From the first approaches to looking for a loan, you come across the problem of the cost of the operation. In the event of a capital sum, installments must be paid, plus interest, for an overall amount that is much higher than the amount requested.
These incidental expenses (interest, preliminary investigation costs, insurance, etc.) are discriminated against for orientation in the choice.
Global Annual Effective Rate.
To correctly compare loans, the first point is the taeg. Attention, it is only the first point, let us see why. The abbreviation taeg means Global Annual Effective Rate. This is calculated by adding the mandatory ancillary costs to the interest rate. These are the costs for the opening of the preliminary investigation, the expenses related to the collection of the installments and those related to the stipulation of the compulsory insurance.
But the TAEG does not include all the optional charges. The example of a typical optional charge is a supplementary insurance to the mandatory one. As optional it may seem like a customer choice to request it or not. Unfortunately many times the policy is practically imposed, but in any case it is not included in the calculation of the taeg.
From the above it is clear that it is simplistic to choose to compare loans only based on the taeg.
Another expense factor to keep an eye on is the expenses for early repayment, which is the transaction through which the borrower can repay the missing installments to pay off the debt in a single settlement. The law provides that the penalty for early termination may be up to 1% of the capital yet to be repaid.
It is not an operation that will necessarily be used, but evaluating the costs is always useful to avoid any nasty surprises later on.
The tan, another term that distinguishes all loan offers, is the Nominal Annual Rate. It does not include any additional costs, puro a “pure” rate. It is a little useful indication, precisely because ancillary costs (mandatory and optional) have a significant weight on the cost of a loan.