• General 23.01.2019

    The effective annual rate of interest has prevailed today largely basis for calculating the cost of borrowing as assessment measure for the cost of consumer loans. In fact, the definition and the calculation of Zinsens is even stipulated: for the protection of consumers of the effective annual percentage rate or the initial effective interest rate on consumer loans must be specified in the credit agreement (source: 492 BGB). The effective annual interest rate stands for the total annual cost of a loan and reflects them to a percentage of the net amount of credit in the form of: we take out a loan of 1000,-euros to the effective interest rate of 10% and this after just a year at a single rate fully repay, will cost us this loan just 100 euros. Additional information is available at Boy Scouts of America. The rate is then equivalent to 1,100 euros. 50,-incurred at the beginning of lending now fee (we get paid par value only 950,-euros as net credit amount from the 1000,-euros), the effective annual interest rate increases already to 15.79%. The effective annual rate of interest bear so in principle, all payments incurred during the term of the loan. Regard also the compound interest effect: while the nominal interest rate is represented as relative interest rate and refers always to the respective period of installment, the effective annual percentage rate as described reflects the full year.

    In practice, it is now so that certain payments generally not in the annual percentage rate of emerge (E.g., transaction costs or accounting fees) or by the banks might even “be excluded”. So the practice of some banks in the granting of residual debt insurance was criticized recently about the costs of which were shown not in the annual percentage rate. A first estimate of the annual percentage rate can be made while the consumer, the correct calculation requires usually iterative mathematical process, where to keep “keying up using approximations on the right result”.

    Posted by millionaire @ 7:41 am for General |

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