Interest is the price paid for the use of the Bank and expressed as a percentage. It represents the ratio of the amount of annual interest and loan amount. The interest rate depends on the type of loan, the period for which the funds are giving away, collateral debt collection and market conditions. The interest rate is changed under the influence of supply and demand in the financial market.
Nominal interest rate
The interest rate which represents the relative number – a percentage that determines how many units of wages per unit of credit and used for calculation of regular interest on a given loan. It can be fixed or variable.
The effective interest rate
In contrast to the nominal interest rate, effective interest rate (EIR) is the real cost of credit. They makes it easier to identify and compare the conditions under which different banks offer the same loans. The effective interest rate, in addition to the nominal interest rate, includes fees. Also include commissions that the customer pays the bank for loans. If it comes to loans granted by deposit EIR includes income from interest paid by the Bank on the deposit.
The effective interest rate includes lot of things. The cost of processing the application; the cost of the loan; the annual fee as compensation for administering the loan fee on the unused portion of a framework loan; the amount of insurance premiums if the insurance requirement for the use of loans; the cost of opening and maintaining that condition for loans; as well as other costs associated with ancillary
services which are a requirement for the use of loans and that are paid by the customer (a fixed fee as compensation for processing insurance, the cost of issuance of the real estate register, the cost of real estate appraisal and moving actually, the cost of certification pledge statement, the costs of registration of the lien – mortgage, the cost of access to the database of indebtedness, etc.).
If you are not sure whether the EIR includes all costs arising from loans taken, ask officials Bank. EIR is a measure of the cost of credit only if it compares debt in the same currency!
Intercalary interest is the interest calculated and charged only from the moment you extend credit to the moment when you start paying it back, or until the payment of the first installment. Depending on business policy, the Bank accrued compound interest can be attributed to the principal debt and the collection of more than annuities or at once – after the expiry of the loan.
Default interest is the interest calculated and charged if the customer fails to fulfill the obligations on time in accordance with the provisions of the concluded contract.
Overdraft, overdraft popular, is one of the most used banking products. Many resort to this loan in the amount of all earnings and advice is that, if you must, use a minus as short as possible.