In the past few years, the financial and economic situation of the state depends directly on the state of the banking system. It is for this reason that the Russian banking system must be constantly strengthened and effectively developed. This is absolutely inevitable, because a huge number of banks continuously create competition for each other in the battle for future customers. At the moment, banks provide a huge range of financial services for representatives of individuals and businesses.
One of the main methods of generating income on a regular basis is lending to legal entities and individuals. That is precisely why it remains at the moment the main type of banking activity. This service is provided in various schemes and areas: lending to home purchases, lending to businesses, lending to consumer needs, car loans, and much more. The concept of lending is closely related to such a concept as the effective interest rate.
Credit organizations attract customers through a variety of loan products and stocks, low interest rates, and even completely interest-free loans, favorable rates and convenient schedules. Such marketing techniques in most cases are only a banking trick focused on attracting customers. No bank will dare to conduct business at a loss, all of them, in any case, on any loan products will receive the necessary profit. In the event that interest rates are low or generally zero, the bank makes profit from various commissions from customer service. For this reason, each client should know what an effective interest rate is. If the borrower does not have the necessary skills and knowledge for its calculation, then the loan specialist should consult with her on consulting clients according to the terms of the contract concluded with the bank.
The effective interest rate is the absolute value of the loan, which takes into account not only the nominal interest rate, but also the costs of processing and servicing it. It is distributed over the entire loan term, and it is expressed as a percentage of the amount that was issued. Russian law says that since July 2007, all Russian organizations are required to demonstrate to the borrower the calculation of the effective interest rate on loans that are issued. This is necessary for the bank's customers, so they can understand what kind of overpayments on the loan they will incur. It often happens that the effective interest rate exceeds the nominal by 2-3 times. It can be calculated using many different methods. For Internet users, specialized calculators are available on bank portals or on the bank’s website, where the client wishes to apply. Calculation can be made only if you know absolutely all the payments charged during the time of using the loan.
Before applying for a loan, the borrower should study as much as possible all the clauses and the most important terms of the contract, and in particular the section that describes how the effective interest rate should be calculated. It will be most correct to study the conditions of all banks to select the most suitable and affordable loan. However, not all borrowers evaluate only this indicator, for some it is preferable to contact reliable banks with a reputation of a certain type.
The effective interest rate on the deposit is calculated almost the same as in the case of a loan, only for the client this indicator means how much money he will receive as a result of using this or that deposit.
It turns out that the client must evaluate how effective the percentage that will result in it will be. If we are talking about a loan, then a person can choose a suitable bank, relying not only on his reputation, but also on an effective interest rate, which will give him a greater advantage.