The credit system today occupies a crucial place in the life of the population of the whole country. Only a few people have never encountered her, but they do not deny the possibility of this in the future. Because of this, it is useful to know how to correctly calculate the overpayment. It is a real amount of money, which is added to the total debt, helping banks to receive income from loans and forcing the client to give extra money.
What is included in the loan amount?
Large and small financial organizations constantly offer loans to the population on various conditions. Only so far, many of them continue to hide the true numbers that customers face. This issue is interesting for everyone, since there are a lot of examples when interesting offers appear on the first call, and when the contract is signed, the amounts change a lot. Moreover, the bank turns out to be right, since certain parameters that are unknown to borrowers apply. What is included in the full loan amount?
- Amount of principal debt;
- Overpayment interest for the entire period;
- The cost of servicing an account and issuing plastic cards;
- Additional fees and commissions.
No person without special education will not be able to cover the full list of subtleties that affect the full amount. This makes us consider separately some parameters that turn out to be the most significant. Such a step will open the veil of secrecy regarding the actions of financial organizations.
EPS
Begin with the effective interest rate (EPS). Its size is dictated by the Central Bank of Russia, forcing credit organizations to save customers from unnecessary overpayments. Usually people pay attention only to bright advertising slogans that promise minimum interest on the loan, but do not understand that each bank has its own framework.
EPS is a complex indicator, the calculation of which requires deep knowledge, therefore it is practically not used in everyday life. However, the effective interest rate is not based on the profitability of a loan, but on the percentage of non-repaid funds. If the bank constantly has losses, specialists have to raise rates so as not to lose their own assets. It is this feature that perfectly describes the huge overpayments in small financial institutions, where customers do not pass a proper identity check in the security service.
UCS
CPM, or payment by an insurance company, is also included in the total loan amount. Only it is calculated according to a complex principle that makes you think about necessity. The fact is that after signing the contract, borrowers often agree with certain insurance conditions. Only they make you instantly pay a lot of money, although no one likes it. It is worthwhile to understand that only with large amounts the banks are forced to agree to such a step, and in other cases it can be abandoned.
Other hidden charges
Before making a loan, almost everyone thinks only about getting the necessary amount of money. At the same time, no one pays attention to certain clauses of the agreement, which indicate additional payments for using the loan. However, a few years ago they were the main problem, which forced a couple of years to increase the main debt several times. What is it about?
- Payment for filing documents;
- Payment of a loan agreement;
- Payment of a credit card issue;
- Cost of account servicing;
- The cost of compulsory insurance;
- Payment for operational services.
The summation of all these points significantly increases the CPM, which means an increase in monthly payments. A few years ago, Russian legislation forced banks to make contracts transparent, after which borrowers were able to see how much money they were wasting. Although this did not affect the popularity of the credit system in a country where material wealth remains too low to receive all the benefits of civilization.
Commissions not included in CPM
There are also certain commissions that are not taken into account during the calculation of CPM. They are optional, but are nevertheless taken into account in the clauses of the contract. They can be listed in order to protect a person from surprises in advance.
- Overpayment for early repayment of a loan;
- Payment for cash services or withdrawals through ATMs;
- Penalties for excess overdraft;
- Commission for transferring credit funds to other organizations.
These items are not used by all banks, so in many cases they affect the choice of a suitable offer. Previously, their assessment never bothered borrowers, but now the difference in amounts is significant. For example, withdrawing money from a credit plastic card at an ATM of a third-party bank often forces you to pay up to 10% of it. Accordingly, when withdrawing 30,000 rubles, a person will receive only 27,000, the rest will go to pay the commission.
How to calculate loan interest?
Only representatives of banks are involved in the settlement of EPS and CPM. People should, in advance, partially find out the approximate overpayment. Such a calculation will not give real results, but will clarify how the difference varies depending on the chosen term or proposal of a financial organization.
It is important that the calculations are easily carried out at home without prior preparation and a detailed study of the credit system. Based on precisely this data, brokers often offer borrowers to choose the best option to spend a minimum of time without going into details.
Initial data
To calculate interest, you need a few input data.
- PP (interest on overpayment);
- SK (loan amount);
- PS (interest rate);
- M (number of monthly payments);
- OSS (loan debt balance);
- PSD (total amount paid);
- DP (additional payment).
Each item should be clear to the potential borrower, but still one of them should be considered in more detail. Often people do not understand why the proposal indicates the annual interest rate, but when calculating the total number of monthly payments is used. The reason for this is that it is far from always that full years are indicated during the execution of the contract. This fact greatly complicates the calculations, giving a more or less realistic picture of the percentage of overpayment.
Formula
The formula for calculating interest on overpayments is not so complicated.
PP = SK / 100 * PS / 12 * M
As a result of simple calculations, any person will know what money will have to be paid in interest. It is worth recalling that in this case it turns out not the CPM, but only a small fraction of it. In many cases, only personal communication with a consultant in a bank branch gives a real picture. Nevertheless, a couple of calculations should be made, showing the true benefits of this formula.
Initial data: SK = 30000; PS = 29%; M = 12 and 24, that is, the calculation of the percentage of overpayment for 2 terms is taken: when applying for 12 and 24 months.
PP = 30000/100 * 29/12 * 12 = 8700
PP = 30000/100 * 29/12 * 24 = 17400
The data obtained indicate that when choosing a loan agreement for 2 years, a person will have to pay 2 times more percent. Based on this, it is possible to freely talk about the profitability of a particular offer, if you do not pay attention to other payments.
With early repayment
It would seem that you can immediately find out what money is needed to repay the full amount of the loan ahead of schedule. Usually people just summarize the remaining months, but they don’t even imagine what mistake they make. They need to know exactly by what principle monthly payments are made.
- Annuity payments;
- Payments on the actual balance.
The first method of monthly payments is based on a preliminary scheduling of the return of funds to the bank. At the same time, the amounts remain constant throughout the entire period, which seems to be the best option for a person. However, the second method is based on regular recalculation of interest, depending on the decrease in the principal amount of the debt. In this case, with early repayment, a categorical difference appears, based on a ready-made formula for settlements.
OSS = SK-SDP-DP
The fact is that PSD varies greatly, because annuity payments imply an initial payment of interest, and then gradually increase the withdrawal of money from the total loan amount. Accordingly, after signing an agreement with a bank under such conditions, it is better not to talk about its premature payment. As a result, you will have to spend a lot of money without receiving any tangible difference, which makes such loans the most profitable for financial institutions.
A sober look at a loan
The credit system has spread widely throughout Russia, but people are just beginning to learn how to evaluate the proposed conditions, having learned how to correctly calculate the overpayment. It is not so easy to do this, because only a sober assessment allows you to consider small "pitfalls" in the contract. Too often they turn into a problem, so you should list a few basic nuances that will help a person.
- Interest rate;
- Additional fees;
- Type of payment;
- Insurance;
- Loan terms.
It is difficult for an ordinary borrower to immediately encounter such a large list, but it is unrealistic to do without it. Usually small nuances are the most serious, so you should pay special attention to them.
Calculate overpayment
True, potential borrowers still continue to think only about overpayment, considering it to be a value that depends only on interest rates. The above are factors that will help change the opinion of the population, but still it is worth giving a hint.
The true overpayment for any loan without the professional assistance of a bank representative is never specified. It is impossible to recognize the CPM, as the formula for its calculation is not disclosed by financial institutions. As a result of this, it is better to find out what money you have to give after signing the contract when you visit the department. Having requested the necessary data, you can subtract the loan amount from them directly in your mind to see the real costs. This action is the responsibility of the consultants, so evaluating your own step is not so difficult.
Optimal choice
Finally, it’s worth talking about the best choice. It should be based on your own preferences. For example, the borrower may know that in a few months it will easily repay the loan. In this case, a bank is suitable where there are no early repayment fees.
It is also worth giving up too long periods. Yes, they significantly increase the percentage of overpayment, but this is not the only nuance. From a psychological point of view, such a choice is optimal for a person, since after the transition of the middle term, his mood begins to improve. Because of this, mortgages to this day remain problematic for young families. The first years of life are always difficult, and when you have to give a tangible share of the joint income every month, scandals gradually appear.
It is convenient to use the credit system in Russia, but it remains opaque. Banks in no case hide their own fees in relation to customers, but people themselves push themselves into a debt hole. They do not possess the necessary knowledge, therefore they often sign contracts on unfavorable conditions. So in any case, first you need to clarify all the details, so that you can then calmly make monthly contributions without worrying about excessive overpayment.