When applying for a loan you must know exactly what APR is . This rate is the most accurate when calculating the price of your loan. So let's analyze what the Annual Equivalent Rate is.
What is TAE
APR is the acronym for Annual Equivalent Rate . This indicator is a percentage value used to calculate the price of a loan.
When calculating the cost of a loan there are two measures. This contains more information to know the cost of financing. The other is the TIN (Nominal Interest Rate). The nominal interest rate only indicates the interest that will be applied to the loan.
However, the APR also takes into account the commissions and expenses associated with the operation , as well as the frequency of payments.
Advantages and disadvantages
As you may have already seen, the APR has the advantage of covering more concepts than the TIN . You must remember that applying for a loan involves associated expenses. For example, notarial expenses for deed, opening commissions, appraisals or taxes, among others.
There are banking and loan entities that attract their clients by offering low interest rates, but they recover this money in commissions and other associated expenses. Therefore, the APR is a more accurate indicator when comparing the price of your mortgage
Its only "disadvantage" is that it is not the only condition to take into account . When selecting your loan, you will have to pay attention to other factors, such as late interest or penalties for paying off the debt early (paying it before the agreed time).
In fact, delinquent interest is often one of the most leonine conditions on any loan. Although they only come into play when you are late in paying the fees, you should take them into consideration, in case something unforeseen happens.
Moreover, in many cases it is cheaper to regroup the debt and pay the remuneration interest of another loan than to pay the arrears of a past due loan. So you should be very careful with this condition.
What is the importance of the APR in a loan
In short, the APR does not reflect all the conditions of a loan. This means that you will still have to review the fine print of the loan to be able to compare such relevant issues as payment terms, ceilings and floors in interest, and so on.
However, the equivalent annual rate is the best tool available to you to compare different offers and to know more accurately the final price of the loan for which you choose.
Now that you know what APR is, you can better assess which loan is of interest to you. But don't forget to compare different options. In Ideal Loans you have the best online financing options.