The total costs of individual loan offers can be found thanks to the mandatory APRC indicator provided by banks. It is important to always consider liabilities with the same number of installments and the same amount when combining different APRCs with different loans.
Comparing different loan offers solely taking into account their interest rate is not correct and does not give a full picture of their attractiveness. So what criteria should be taken into account not only to compare loans, but to choose the most advantageous of them from the point of view of the future borrower?
Factor for comparing credit costs
The interest rate on a bank loan is often the criterion for choosing the bank where the customer will eventually commit. However, the attractiveness of the loan offer should be determined by the total cost of the loan, which is ultimately borne by the borrower. The APRC is about it, ie the Annual Annual Interest Rate.
The APRC is actually an interest rate that specifies the full cost of credit that is charged to the consumer. It includes both the interest rate on the liability and all other charges, including commission for joining the loan or examining the loan application.
Any bankis obliged under the Consumer Credit Act to present in its promotional materials, offers and credit agreements the exact value of the Real Annual Interest Rate. So you don’t have to calculate it yourself.
In order to effectively compare different loan offers, it is not enough to match their APRC rate. The offers should be the same in terms of loan amount and loan period, which translates into the number of installments in which we will repay them to the bank. APRC allows you to verify credit offers in such a way as to select the cheapest option in real terms.
What else is important?
Credit costs increase with the extension of the loan repayment period. This generates a lower capital and interest installment, but at the same time the debt to the bank with interest is repaid more slowly. However, extending the loan period will in many cases become a necessity if the shorter time allowed for repayment of the loan results in the customer having too little creditworthiness.
Bringing the total number of installments of loans, reduces the monthly burden on the borrower, but the APRC its obligations increases.
The bank’s customer should always choose the debt repayment method so that it matches his existing and future financial possibilities. It is beneficial for the customer to allow the bank to take credit holidays if he cannot temporarily repay the installments. Credit holidays may report to the non-repayment of the entire principal and interest installment or capital portion.