TIN and APR: what is the price of a bank loan?

When going to ask for a loan, we must take into account mainly two things: the Nominal Interest Rate (TIN), which is the price we pay for the borrowed money, and the Annual Equivalent Rate (APR), which includes the commissions, the term of the operation and the TIN of the credit that we want to request. Next, we are going to know all the details of how both concepts affect a loan or mortgage. 

What is the difference between TIN and TAE?

The Nominal Interest Rate or TIN is the price we pay for a loan, that is, the money we have to pay the bank for the borrowed capital. The TIN is, therefore, a specific percentage of the total amount lent by a bank to establish the parameters of a financial operation such as a mortgage loan. In general, the TIN is calculated every month. The TIN must be indicated in any contract for banking products such as deposits, loans, credits, or mortgages since it is the price we are paying for them, as explained in this Finance for Mortals content. 

The Annual Equivalent Rate or APR, for its part, is made up of many other variables, including the TIN itself, in addition to the possible bank commissions associated with a hypothetical such as cancellation or amortization, the expenses of the operation being carried out, or the opening commission, among others. The APR does not include the expenses of the acquisition of the product such as notaries, insurance, or bonds. The APR is obtained utilizing an established mathematical formula and, in the case of Spain, it can be consulted here. 

What is the TAE?

Both concepts are official and are supported by the national financial authorities of each country, although in each geography these terms receive a different name. Thus, TIN and TAE is the name they receive in Spain, while in Argentina they are TNA (Annual Nominal Rate) and TEA (Annual Effective Rate), or in Mexico, CAT (Total Annual Cost). 

TIN and APR of financial products

In the banking offer we can find, as highlighted in this Santander Consumer content, both concepts, generally, in three types of financial products: savings, personal loans, and mortgages.  

What are the TIN and the APR of a bank loan? The Annual Equivalent Rate of a bank loan is the real amount that the client is going to pay to borrow money, and includes commissions, the term of the operation, and the interest rate, a concept that can be learned more in-depth in Sano’s dictionary of Lucas. In this way, the APR acts as a backpack where we put almost everything that will finally be part of the loan. In addition, it allows us to know simply what the total cost is going to be: that is, the money that the bank has lent us plus the expenses that already appear in the APR. 

For example, if we have requested 100,000 euros in an operation with an APR of 1%, our loan will actually have a total amount of 101,000 euros, since that is what we must return to the bank that has lent us the money.

The APR, therefore, is an indicator that shows the annual interest rate and commissions and is very useful for comparing various loans with the same term of time. However, when applying for a mortgage loan, it is also convenient to take into account other factors that this indicator does not contain, such as, for example, real estate appraisal. 

The Nominal Interest Rate, for its part, is usually presented prominently in the loan contract itself, but it is important to remember that it appears independently and that we must bear in mind that it is part of a larger backpack that includes other Concepts such as expenses and associated commissions. Therefore, what we should look at to make a comparison between loans is the APR, since it encompasses a large part of the costs of the operation and this is what will allow us to get a more accurate idea of ​​the total to be paid for the money requested. to a bank If you want to know more details about these concepts and what makes them different, you can access this Openbank content.

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