See the Costs to Hire a Personal Loan at the Bank
Many people carry out a financial loan transaction for many different reasons, whether it is a dream or a one-time need, it is very important that making a loan decision is totally rational and that the transaction is an ally for the fulfillment of your dreams and not that it becomes a nightmare. For this reason it is very important that a survey of all the fees involved in the operation is carried out very carefully before the operation is carried out.
The best way to evaluate a loan
All banks and financial institutions, which make loans, are obliged to provide in their contract and simulations the CET, Total Effective Cost of the operation. This indicator basically shows all the costs involved in contracting the Loan, that is, the interest rate and all fees and charges made by the institution in the operation. Therefore, whenever you compare loan options, take care to compare CET with CET, ie consider everything involved in the transaction.
Often, banks lower the interest rate to attract customers, but offset this by charging other fees in the operation that would otherwise offset this reduction.
What is taken into account for the formation of the Total Effective Cost:
Basically in Total Cost Effective (CET), all the costs involved are considered, be they tariffs, expenses, insurance beyond the interest rate, we will list below which are:
- Interest Rate: It is the main factor of the loan, the interest rate indicates how much will be charged on the amount borrowed for a certain time, in most cases it is presented in percentages per month or year.
- Fees: Costs that the financial institution can pass on to the borrower, whether for the preparation of documentation, consulting fees, and finally, operational fees.
- Charges: In this item are considered the taxes collected, the IOF – Tax on Financial Operations is incident on all lending operations.
- Insurance: The financial institution and the borrower of the credit are insured with financial protection, the most famous being the Lender Insurance, where depending on the contracted conditions can cover the payment of the installments in case of death, loss of employment among other factors that may financial commitment.
It is very important to take into account all these factors when taking a loan, often the fees and insurance involved in the operation are so relevant that your costs exceed the amount paid as interest rate.
Best way to reduce rates or the insurance
For this reason always be wary when you are negotiating a loan and your Bank manager says that you got the best rate in the market, or check that ad with zero interest rates, or very low. It is always very important to check the CET, Total Cost Effective, so that your low rate does not become a lot of tariffs or insurance with amounts totally disproportionate to the operation.
An important tip, the best way to reduce rates or the insurance premium is to negotiate between several institutions, they have enough room to negotiate these rates and usually already have a very good interest rate remuneration, so do not be afraid to negotiate , is the best way to get a good deal.