Loan interest calculation


If you have never had to apply for a personal loan or request a credit online before, it is essential that you know the basic terms of this financial product that you must take into account in addition to the monthly payment that you will have to face every month according to the amount borrowed.

Loan interest calculation

Learn how to calculate the interest on a loan: the TIN and the APR

What is the TIN?

The Nominal Interest Rate (TIN) is the percentage of the loan amount that the bank or the online mini-credit company will charge you for the money borrowed. This percentage is normally between 5% and 10%, but although a TIN of 4.95% or 5.45% can be found, the best online mini-loan companies offer a TIN of 6.95%.

If you see a personal loan that offers you a TIN of 0%, that is, without interest, and the company that offers it is regulated by the Bank of Spain, do not think that it is a scam since it is a legal marketing strategy used by the best online loan companies in Spain to attract new customers and build trust in your financial products and services. Although they are free credits because you will not have to pay interest for the TIN, remember that they normally only offer online mini-loans of 300 euros.

What is the APR?

In financial jargon, the Annual Equivalent Rate (APR) implies other expenses different from the previous interest that there is also in a financial product. It is an indicator that basically includes three parameters:

  • The Amortization Term : refers to the time it will take for the borrower to repay his loan quickly.
  • The Amount Requested : since it is not the same to request an urgent credit to pay a visit to the dentist than to request an online credit to do a home renovation. That is, it influences whether the amount borrowed is small or higher.
  • Commissions : their application depends on the policy of each personal loan company or line of credit. The two most common are commissions for opening and commissions for study and apply a specific fee for management expenses when studying the case of the applicant for the mini-loan and making the money available to them.

Remember that when calculating the interest on a loan, the binding products that the financial institution may offer you, such as life insurance, home insurance, car insurance, etc., are not taken into account.

Example of loan interest calculation

Previously we said that you can find a free loan without interest of up to 300 euros, although this is only due if the TIN is 0%. But what about APR? As we also discussed, it depends on the policy of each financial institution.

Imagine that they approve a credit of 1,600 euros with a TIN of 0% that you are going to pay in 6 months but they demand an opening commission of 60 euros. Under these conditions, the loan is no longer free as it includes an APR of 14.07%.

If you do not know how to find the best online credit in Spain according to your personal situation, we recommend that to obtain a personalized financial product you use an online personal loan comparison or simulator. Its use is free and it will not link you with any mini-loan company since it will simply offer you information on interest rates and monthly payments according to the amount you need and the time you need to pay your loan.

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Roger molins Jerome P Allison ( LinkedIn )
I am a freelance writer and consultant for companies and individuals, with a particular emphasis on fintech, technology, startups and online marketing. More information ...

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