How is the total cost of the loan determined and what is it for?

In our time, the information space is filled with proposals for profitable loans. Banking institutions publish conditions one better than another. However, the most important indicator for the recipient of funds - the full cost of the loan - often remains in the shadow of more attractive options.

But after all, it is the amount of money paid to the bank that becomes the most distressing moment after debt repayment. In addition, this concept is very important for individual entrepreneurs and organizations. Depending on the entry of certain payments into the cost of a loan, the cost of production and services is added.

How the full cost of the loan is calculated. What are the legislative norms?

How is the full cost of the loan calculated? Until some time, there was no harmony in this matter. Any authorized organization could, in its methodology, advertise loan services. Most often, very small percentages were offered, sometimes bordering on common sense and the refinancing rate. However, it subsequently turned out that the final payments were several times higher than their stated size.

The Bank of Russia in 2008 was concerned about this problem and adopted a document, according to which it was appropriate for credit institutions to calculate this indicator. Now, to correctly reflect the full cost of credit, the formula should be applied alone.

In this way, this procedure began to be regulated, and, although it provides some deviations, they are no longer of a fundamental nature.

What payments are included in the loan cost. Let's consider this issue in more detail

At present, the full cost of the loan includes the following payments of the borrower:

- Amount paid in the repayment of the principal amount of the loan;

- amounts paid in order to pay interest on the loan ;

- commissions for reviewing an application for a loan or for issuing a loan (very rarely used or have a hidden nature);

- commission for bank account maintenance (withdrawal of cash, transfer to third-party accounts, etc.);

- commissions used to issue credit cards: the cost of the card itself, fees for its annual maintenance, and so on.

But this list is not complete. The full cost of the loan has recently increased by payments for life insurance of the borrower or his responsibility for the provision of collateral. It should be said that in this way banks shift their own risks to the clients' shoulders. However, the recipients of credit most often resignedly resigned to these conditions. After all, money is needed.

What amounts are not included? The central bank has also established a number of payments, which do not affect the cost of the loan. Here they are:

- payments not related to the fulfillment of the terms of the loan agreement, such as MTPL, etc .;

- sanctions imposed on the borrower in case of non-fulfillment of the terms of the contract;

- payments made on the initiative of the borrower, usually it is a commission for early repayment, payment for information on the status of the credit account, a commission for making or withdrawing cash;

In some cases, this list is expanded due to the following costs:

- commission on transactions in foreign currency, if the contract was in rubles;

- Commission for transactions conducted by other credit institutions;

- payment of suspension operations.

The full cost of the loan may have different options for payment, depending on the size of payments. If the borrower stops at a periodic change in their value, the value of the loan is determined by the maximum amounts and terms of return. If he chooses more quiet regular payments, usually monthly, then it is calculated on these grounds.

It would seem that a simple borrower will be able to calculate all the amounts that he will have to pay. In actual fact, most likely, it turns out that its figures will differ from banking ones. And, of course, in the smaller side. So it's best to compare banks' proposals in this way. No more.