The cost of credit, in practice felt as the amount of installments to be repaid, can basically differ in the offers of banks, which can be seen already when using comparison websites. What does the cost of a loan depend on? What elements does it consist of? It’s good to know the answers to these questions before applying for a loan. Do you know enough about loans? Check with us.
The total cost of credit is a term referring to all costs that the consumer incurs in connection with the credit agreement (e.g. mortgage). This cost includes: interest, commission, margin, additional services.
The interest relates to the interest rate on the loan
The banks set the interest rate on the loan annually, with the official value not exceeding four times the lombard rate set by the National Bank of Poland.
The commission is a one-time fee charged by the bank when granting the loan. The fee is determined as a percentage of the value of the loan granted. Few banks decide to opt out of the commission. However, even if the loan is free of commission, banks often add additional costs that “compensate” for the lack of commission.
The margin is a component of the annual loan interest rate. Banks add their margin to Astro Finance, which is usually unchanged throughout the duration of the loan agreement. However, the Astro Finance value is already variable. This affects the amount of individual installments. Thus, the interest rate during the loan period – despite the constant margin – is variable. If the loan margin is 2% and Astro Finance at the moment 3.88%, then the interest rate on the loan is 5.88%. When Astro Finance changes and amounts to 4%, the interest rate on the loan will increase to 6%.
Banks may also charge fees for certain additional services associated with a loan. This can be, for example, insurance against loss of work in the case of a mortgage, insurance against the loan itself or a fee for maintaining a bank account.
When applying for a loan
We can face the phenomenon of cross-selling. It’s about selling several products at the same time. What does this mean in practice? The bank may offer to take out additional insurance or a credit card in exchange for a reduction in the interest rate on the loan or the margin. However, it is worth checking carefully whether buying additional products will actually make you pay less for the whole (credit, additional services).
list of payday loans online on our website. When making a decision to take out a loan, it is worth checking the actual annual interest rate (APRC). APRC is a standardized measure of the cost of credit, which takes into account the interest rate and other costs of the loan.
When deciding on a loan, one must not forget about non-bank costs, e.g. notary fees, tax on civil law transactions, costs of establishing a mortgage, fees for a credit advisor.