Know what is TIN (nominal rate) It is essential when you want to order a bank loan or any type of financing. If you keep reading, in this article you will know what is, implications and its difference with the APR.
Índice
Interest on the application for bank loans
One of the critical points when managing a bank loan is the interest to be paid. Financial institutions condition the loan to the repayment of the amount plus compensation, called interest. Interest is calculated taking into account different internal and external variables. They are the following:
National interest rates
He European Central Bank (ECB) It has official interest rates that are taken as a reference. A financial institution has a greater interest in lending money the lower the interest rates and, consequently, the cost for the user will tend to be lower. This question is usually related to the Economic Situation of every moment.
personal risks
He default risk It is associated with each client and, consequently, the amounts to be returned will vary depending on who makes the request. A person with a good credit history You will tend to pay less interest and you will be granted more. On the other hand, if a person is in the ASNEF file, it will be more difficult to obtain financing and it will be more expensive.
Market
The credit market has a competition interna because today several operators operate. There are traditional financial entities, but we also have companies fintech. Today it is convenient for you to compare so that you can choose with criteria what interests you the most.
What is TIN (Nominal Interest Rate)
He interest calculation It is essential for two reasons. First of all, you have to know how much is the loan worth that you are going to request to see if you can return it. Secondly, it is convenient for you to be able to know a reference rate for compare it.
He meaning of TIN is that of nominal interest. The Nominal Interest Rate gives you the information cost of money borrowed in an operation. In other words, it represents the effective percentage that you have to pay beyond the capital amortization. This is the basic information you need to know how much you have to pay. You have to consider two factors, which are the type of interest and the return period.
This is a basic magnitude that must be used to rule out very expensive operations. Of course, to make a more approximate calculation, you can use other variables.
It must be said that, by itself, this information, being basic, is not the most complete. There are other variables such as APR that can expand the data you need.
Calculation of interest on personal loans
He TIN in personal loans it is usually the result of the agreement between lender and borrower. Issues such as the solvency of the client, the return period and the borrowed amount, among other issues. Another aspect to note that can determine the interest to be charged is the company's own policy. In this case, there is usually a larger difference between the APR and the TIN.
Calculation of interest on mortgage loans
He mortgage bank loan takes into account all the aspects that have been indicated for the personal loans. Of course, we must add another aspect such as the eurybor for add the total amount. To this linear interest rate, the differential applied by each financial institution. When interest is calculated on these types of loans, there is usually not much difference with the Annual Equivalent Rate.
The differences between TIN and APR
The Equivalent Annual Rate (TAE) It is a mathematical formula that is used to calculate the actual cost of the loan. Unlike the TIN, it takes into account the linked products, amortization costs, Bank fees and other amounts. This compound interest calculation formula lets you know what annual percentage you have to pay.
The result is that knowing the TAE is more useful to calculate what you really have to pay. Not surprisingly, a series of additional factors are taken into account that are not considered in the TIN. So, you have a series of data that will be very useful to you. Most people who take out a mortgage or personal loan consult this variable.
As a general principle, the TIN will give you basic information that, in loans, you should complement with the APR.
Conclusion
The calculation of interest is a critical point in any loan operation, whether mortgage or personal. If you are interested in knowing what the real interest is that you are going to pay for your loan or mortgage, you are interested in having all the information. Know what is tin, its meaning and relationship with other variables will be useful for your financial stability.