The decision was made: you take a loan! Do you really know what this involves? How much does a bank loan cost? Are you aware of what the total cost of a bank loan means? So today we will try to clarify the term that you should know if you intend to act as a borrower: what does the total cost of the loan mean?
Let’s start with the basics and answer the question: what exactly does the total cost of a loan mean? What is the definition of the total cost of credit? Pursuant to the Consumer Credit Act, the total cost of credit is a term used to describe the total costs that a person taking a specific loan will be required to pay. What does this mean in practice? Thus, the total cost of credit includes all costs that the borrower will have to bear when concluding a consumer loan agreement. The total cost of consumer credit is a concept that you must know!
We already know what the total cost of the loan is. Calculating the total cost of credit is another issue that needs to be addressed. The obvious question arises: how to calculate the total cost of a loan? What factors should be kept in mind? What is included in the total cost of the loan? It is very easy!
If you want to know the total cost of the loan, you need to know first of all what makes up the total cost of the loan. Simple right? What does the total cost of the loan include? The total cost of credit includes, among others, fees, commissions, interest and insurance. However, the total cost of credit does not include those costs that are associated with specific notary fees that must be paid by the party lending money from the financial institution.
We determined what constitutes the total cost of the loan. How then can it be calculated? Here, the principle is fortunately simple: you need to add together all the components that make up the total cost of the loan for a particular loan. Why is (total cost of credit) information worth knowing? You don’t need any explanation here, after all, our money is at stake, right?
Knowing the terms correlated with loans is essential. How, without proper knowledge, can you make a sensible decision about assuming a loan? We hope that this brief study will help you understand the concept of the total cost of credit!