The belief that if we want to determine which loan or loan offer is the most favorable for people, it is necessary to verify the level of APRC. Although many players do not really know what is behind this shortcut, it is of this type. However, by browsing the pages of loan companies, you can get dizzy. In some cases, this parameter reaches the price of up to several thousand%. Then we start to wonder whether the incurring commitment will not contribute to the progress of our debt. Depending on this, it is worth having an idea of why such significant differences can occur after the APRC.
What is the abbreviation RRSO?
Let’s start with developing the abbreviation RRSO, behind which the Real Annual Interest Rate is hidden. The following percentage indicator, on which, apart from the nominal interest rate, loans (4 times the Lombard rate of the National Bank of Poland), comprise additional non-interest costs. According to the Act on consumer credit, these are costs connected with a given obligation, i.e. commissions, cleaning costs, insurance, costs of ancillary services, for example, loans for home, the value of money during, as well as a fee combined with consideration of the application.
After offers, usually the main fraction of advertising is the Annual Interest Rate. Described as “low”, it attracts our attention, especially if we need money quickly and we do not have time to go into details. The APRC is then recorded as a small print, usually at some point at the end of the offer. Occasionally when we read such information at all, and they can show how important it is to our company. Let’s explain what the Real Annual Interest Rate is all about.
APY is a bad coefficient for short offers
Simply put, the APRC gives us a doubt as to how much it can cost to take on a given sum for a period of 12 months. The less time we have to pay, our value of the indicator is higher again and again. In the case of companies providing payday loans, we usually have thirty days to repay the obligation. Such a much shorter period than 365 days a year, hence the Real Annual Interest Rate obtains even cosmic values. Apart from this, if APY costs 2000 percent. it does not mean that he will come back to us with a sum two thousand times higher than we borrowed. APY, as we mentioned, indicates the annual interest rate. Therefore, in the case of short-term loans, it does not seem to be an appropriate indicator. When comparing individual offers, the repayment period and terms of the loan would have to be identical, and this is never the case.
Loans for installments and payday loans and their “APY” ratio
In such a case, is the RRSO indicator more useful to us when we are interested in installment loans? Aasa Polska gives us up to PLN 10,000 for a maximum period of 24 months. We have the opportunity to ask ourselves if this seems to be a better offer than the offer of a lender that only gives me a commitment for twelve months? As it turns out, APY in the case of a longer repayment date will be lower, but it does not mean that we will incur lower expenses. Fees can be identical, and suggesting that one of the products is cheaper, because it allows you to spread the repayment over a longer period, should not be true. However, it is worth knowing how to calculate APY because we do not have the motive not to trust this indicator. We just have to capture that it does not only determine the sum of costs, but also refers to the period in which we have to make noise.
A special formula is used to calculate the APRC, whereas the change in the value of money over time seems to be an important factor influencing the value of this parameter. It means the following, how much we would earn if we would have given a given amount of the benefit on an interest bearing deposit thanks to the same amount as the loan possibilities. Hardly anyone will be able to apply this formula, but its results suggest many of us, and opinion-making TV information. Everything is broken on him for one-year cohabitation, which does nothing like borrowing on the Internet. On them, the amount to be repaid after the loan perspective is important, and the whole year is rejected.
In Fluke, we do not have to personally calculate the APRC value. The application of the actual price of the Annual Mixture The interest rate is the responsibility of any financial section that provides goods that will help support our budget. If, however, we would like to verify ourselves, for example, the Real Annual Interest Rate, we have the opportunity to use the available in a large number of pages of calculators. By completing individual fields, we will know the price of the APRC and confront this message with the data we have obtained from the lender.
Changes to the anti-usury law
Mostly, there was a lot of bad communication about the cost of loans. Borrowers had a lot of trouble through high fees and also – although they repeatedly ruined the budget catalogs, they could not renounce external financial aid. The government decided to amend the rules of the anti-usury law and on March 11, 2016, its new project came into force. The main decision contained therein was to reduce the cost of loans and calculate them on the basis of one common formula. From that day, the costs can not be more than 25 percent. loans plus 30 percent this amount for the whole year. Most importantly, all fees must be included in them, and therefore not only commission, but also preparation fee or insurance. As for the amount of interest, nothing changes. They can amount to four times the lombard mixture of the National Bank of Poland, and therefore 10%.
Rolling long between companies
In connection with the interference with the costs with which the lenders windowed to extensive values, some of the services offered by them ceased to be profitable. In particular, the talk here on rolling loans – until this period, the borrower could shift the repayment term virtually indefinitely. This significantly increased the income of the loan company, which was charging too much for such a possibility. The anti-usury law has introduced cost limits, which is why loan companies can not currently impose high fees on extending the loan period too long. It would be unprofitable for them to continue offering this service, so they offer refinancing to clients. Their debt is taken over by a different financial institution that limits our commitment. We sign an innovative contract, as a result – we have more time to sort out the payments. It is worth to opt for such a solution if we do not have the option to pay off the amount due. Otherwise, the lender will impose penalty interest on us and send a warning.
What to look at when choosing a weekend
APRC, and therefore, among others commission and interest rate, then not the only important issues. We need to check the lender much more accurately, both in terms of providing services in accordance with the law, as well as the convenience of the offer. We can check rankings, suggest opinions, but above all we should be sure that the lender puts the client’s needs first.