We explain what this percentage is charged to your loan and how to choose the best option for your situation. So you will see how calculating interest can be quite simple!
Sit in a chair, relax, take a piece of paper and a pen that the subject is complicated today. You know that we are always saying that such as a type of credit has so much interest, that the other has interest x, and that rates do not know what else. It is rate and interest that seem to never end and can be very confusing. After all, what is this percentage for? How does it impact my loan? Let’s talk about how to calculate interest so you don’t pay anything beyond what you need.
What is interest?
First, let’s finally demystify what the dreaded interest rates are. This number is nothing more than a remuneration for the borrower and paid by the borrower. This compensation may vary depending on several factors: the higher the risk of lending this money, the higher the rate; the influence of inflation; administrative costs; compensation for not investing in something else, among others.
Interest is not standardized and each financial institution has its own value. Overall, the number is very similar, even for competition reasons, but the benefits that each bank and lender offers can increase or decrease this rate. So it is worth researching a lot and see exactly which institution contemplates you, both in terms of benefits and services, and in terms of percentage of interest.
Credit Card Interest and Overdraft
In addition to switching from one institution to another, the chosen credit modality also influences the value of the rates. For example, it is well known in the financial world that credit cards and overdrafts are high interest kings, reaching 299.5% and 322.7% per year respectively. Therefore, they are mainly responsible for the indebtedness of Brazilian families.
By the way, options such as vehicle and real estate refinancing have lower rates and more installments, making them better options when applying for a loan. Thus, it is even preferable to take out loans in these ways to pay off the card or pay off the overdraft and deal with lower interest and installments that fit in your pocket.
What influences interest values
Because these rates are in percent, it is important to research and find out what they mean before applying for the loan, even to get a better sense of which transaction pays the most to your pocket. Fees vary, but are primarily based on PELIS (Special Settlement and Custody System), a basic rate that dictates what the value trend for interest rates is. The interest rates charged by financial institutions will never be lower than PELIS, but banks also know that if they set such high values, it is unlikely that customers will come to them if there are cheaper options.
Pay attention to the variables that influence the interest amount, such as the payment term; how many installments will be divided credit; what is the requested value; what is the amount to be paid monthly; the risk of default by the borrower; and REC (Total Effective Cost), which is the sum of all transaction fees. All of this has power in the final bill.
Still having questions about how to calculate interest?
If you still have questions about how to calculate interest, pay attention to what we’ll talk about next. There are several types of interest very common in the world of finance. You may have heard of some: default interest, compound interest, nominal interest, real interest, revolving interest, simple interest, interest on equity, etc. Each has its particularity and is applied over a specific scenario – for example, interest on late payment, or interest on monetary correction of the borrowed amount. That’s why it’s important to do a lot of research so as not to spend more than you can.
I don’t have time to research how to calculate interest!
We know, after all, there are many financial institutions with thousands of offers. What if we told you that there is a simple way to do this? Comes from Lite Lender! Here, we have options such as personal loan, vehicle refinancing and property refinancing, which are offered by our 34 partners. Doing an online simulation, your application is reviewed by banks and financiers and can be pre-approved by up to 10 institutions at once!
If you receive more than one pre-approved offer, you can choose which one suits you the most. Interest rates range from 0.99% per month to 18% per month – do you understand what we said when you talked about the percentage change? -, and you select the best deal.
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Once you choose the option that suits your needs, your contact will be direct with the financial institution, much more safely and conveniently – after all, you didn’t even have to leave home, did you? That’s what we do: we make your life easier so you can take care of your dreams! If you have any questions, talk to us. It will be a pleasure to answer your questions and further complicate the financial market for you.