There are such frequent terms in our lives and in our environment that, on occasion, we end up assuming them without fully understanding what they mean in practice, as is the case with many economic or banking terminology. An example of this is TIN, an interest rate with which financial institutions try to be competitive and offer a service as attractive as it is profitable.
So that this concept does not have secrets for you, today we explain what are the differences between the TIN and the APR in a loan, since they are essential when you go to choose it or negotiate to grant you one.
Type of interest
When a bank or financial institution grants a loan, it charges a percentage on the money it lends, thereby obtaining benefits for such an operation. This fixed percentage, in a given amount of time, is the TIN (Nominal Interest Rate), and the bank determines it in both loans and credits, mortgages and deposit agreements.
However, as a consumer, you have to take into account that this isolated percentage is not enough to analyze whether or not the conditions of the loan offered to you are convenient since you should also consider other expenses and commissions, as well as the periodicity of each payment. The TIN will give different results if it is made in a single payment per year or if it is done monthly. In the event that it is not specified, it is understood that it is annual. In any case, only with this data it will not be possible to calculate the total cost of the operation.
Annual Equivalent Rate
The APR (Annual Equivalent Rate) is the other relevant data that you have to look at when negotiating a loan. And it is that this rate is what calculates what your real cost will be, taking into account deadlines, commissions, expenses and periodicity of payments.
For the calculation of the APR a mathematical formula is used, which includes the TIN, bank commissions, the periodicity of payments and the expenses of the operation. Banking and financial institutions are required by law to inform customers of the conditions of the loans, detailing the APR in the pre-contracting information, in the contracts and in the advertising of the products.
Precisely because of all of the above, it is the APR that allows the consumer to compare the different offers in the market, and select the most advantageous of all of them, since thanks to this rate he will be able to know how much the credit will actually cost him.
Remember that the Cream Bank website offers an online calculator to determine the APR for a personal or mortgage loan. For your calculation you need the following information: the amount of the loan or initial capital, the amount to be paid at the time of purchase or the constitution expenses, the fee (periodic expenses) and its periodicity (monthly, quarterly, semi-annual or annual), the annual nominal interest rate, the repayment term in months or years, and the subsequent interest rate in case this is modified as of a certain date.