If you have never had to apply for a personal loan or request a loan online, it is essential that you know the basic terms of this financial product that you must take into account in addition to the monthly fee that you will have to face every month according to the amount borrowed.
Learn how the calculation of interest on a loan is: the TIN and the APR
What is TIN?
The Nominal Interest Rate (TIN) is the percentage of the loan amount charged by the bank or online mini-credit company for the money borrowed. This percentage is usually between 5% and 10%, but although a TIN of 4.95% or 5.45% can be found, the best online mini-loan companies offer a TIN of 6.95%.
If you see a personal loan that offers you a TIN of 0%, that is to say without interest, and the company that offers it is regulated by the Bank of Spain, do not think that it is a scam since it is a legal marketing strategy used by Spain’s best online loan companies to attract new customers and build trust in their financial products and services. Although they are free credits because you will not have to pay interest for the TIN, remember that they usually only offer online mini-loans of 300 dollars.
What is the APR?
In financial jargon, the Annual Equivalent Rate (APR) implies other expenses than the previous interest that is also in a financial product. It is an indicator that basically includes three parameters:
- The Amortization Term: refers to the time it will take for the borrower to return his loan quickly.
- The Amount that is requested: since it is not the same to ask for an urgent credit to pay a visit to the dentist than to ask for an online credit to make a reform at home. That is, it influences whether the amount borrowed is small or higher.
- Commissions: their application depends on the policy of each personal loan company or line of credit. The two most common are the commissions for opening and the commissions for study and apply a specific fee for the management expenses when studying the case of the applicant of the mini-loan and putting the money at his disposal.
Remember that during the calculation of the interests of a loan, the binding products offered by the financial institution such as life insurance, home insurance, car insurance, etc. are not taken into account.
Example of loan interest calculation
We previously said that you can find a free interest-free loan of up to 300 dollars, although this is only due if the TIN is 0%. But what about the APR? As we also comment it depends on the policy of each financial entity.
Imagine that you are approved for a loan of 1,600 dollars with a TIN of 0% that you are going to pay in 6 months but they require an opening commission of 60 dollars. Under these conditions, the loan is no longer free as it includes an APR of 14.07%.
If you do not know how to find the best online credit in Spain according to your personal situation, we recommend that you obtain an online personal loan comparator or simulator to obtain a personalized financial product. Its use is free and will not link you with any mini-loan company since it will simply offer you information on interest rates and monthly installments according to the amount you need and the time you need to pay your loan.