Interest-free loans are those in which the borrower is only obliged to return the capital obtained. This does not mean that they are free, as fees and charges will sometimes apply. In addition, if the borrower does not pay on time, default interest will also apply. The issue is then clarified and its advantages and disadvantages are discussed.
Interest-free loans: myth or reality?
The loan is, according to the Civil Code, an essentially free operation . However, it is not lost on anyone that, in most cases, the lender wants to do business by risking their money.
This use of the loan is legal , legitimate and has great acceptance, as long as the interests are not abusive. In fact, usury is prohibited by the Spanish legal system. So does this mean that an interest-free loan is free?
How the interest on a loan works
To answer the previous question, you have to know how the interest on a loan works . First of all, it is necessary to differentiate between:
- Remunerative interest . It is a percentage that is applied to the borrowed money to calculate how much the borrower will pay the lender. In short, it is the price of the operation . It is usually determined according to a nominal interest rate (the famous TIN).
- Interest on late payment . They are an interest rate that is applied as a penalty for late payment of fees. As with remunerative interest, the lender may demand the interest rate it deems appropriate, provided that it is stated in the loan contract.
Ultimately, when the expression "interest-free loan" is used, reference is made to remuneration. In other words, if the borrower is late in payment, he will still have to pay the late payment . But, if the borrower pays on time, will his loan be free without interest?
Expenses and commissions
The previous question has a "trick" again, since most loans have a series of expenses and commissions associated with them . Therefore, even if they do not have interest, they will continue to have these costs. That is why the APR is often used to check the real price of the loan. The APR is the sum of the TIN plus these expenses and commissions.
So, should you apply for an interest-free loan?
In short, these types of loans are real, but not free . However, given their great advantages, it is advisable to request them before other types of credits (if there is a possibility).
Although their associated costs are usually higher, in the final price calculation they tend to be cheaper . Thus, interest-free loans have certain advantages (TIN is not paid) and disadvantages (other costs are paid) but they are usually profitable. To see if they are cheaper than other financial products, you just have to compare the APR of both.
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