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Calculate Total Cost of Credit

 

Niche true miracle peculiarities sought to calculate lighter pieces, investment loans total cost formula. Only certain costs are taken into account in the valuation by the banks (eg for calculating the interest conditions).

Annual percentage of exposure

Annual percentage of exposure

The annual percentages indicate the total cost of a loan to the borrower as an annual percentage of the loan approved. The annual percentage of the burden in Switzerland must be set out in consumer credit agreements. The consumer credit contract must be calculated on the basis of a calculation formula specified in the Consumer Credit Act (KKG).

Credit institutions charge different fees for loans. The fact that loans are a very complex subject is already suggested by the book-heavy contracts. But what is behind the various fees that the debtors have to pay?

Most economists assume that credit institutions not only want to earn something with these taxes, but also want to shape customer behavior. If a loan is not granted by a house bank to a single person, but by a merger of several house banks into one house, the fee schedule is again cumbersome.

Syndicated bonds

Syndicated bonds

Most of these so-called “syndicated bonds” contain a whole range of different fees, which vary depending on the type of loan. On the one hand, the credit price should be checked in order to control the likelihood of the loan being drawn.

They also determined whether the approved funding had been used up and examined the creditworthiness of the companies. They have processed all the information collected in this way using special computer programs. In this way, they were able to calculate whether and to what extent the different variables influence each other. Indeed, fees are a good way to anticipate potential customers.

“On the other hand, companies that opt ​​for high interest rates and low fees make very few claims on the total loan volume,” Tobias Berg summarizes the evaluations.

On the other hand, the researchers were able to demonstrate that fees help less to determine the loan price than they compensate for the associated risks for the credit institutions. For this reason, companies with a high level of developmental uncertainty also have to accept increased order fees for the options of early repayment or non-use of the loan – they are more willing to not use the promised value after all or to repay it earlier and thus earn less the house bank.

You have brought these requirements into a new concept, with the help of which it is now possible to calculate these actual costs for each loan individually. Now researchers are hoping that their research will contribute to greater clarity in the credit thicket.