Applying for a loan online is a simple transaction to make, but before doing so it is important to know some of its terms. One of the words that bring many doubts are interests, especially what are TIN and APR. These terms are in different financial procedures, so it is important to know the function of both. Learn a little more in today’s post.
What is the TIN
The acronym TIN refers to the Nominal Interest Rate. This means that it represents the percentage obtained by the lender and is added to the total amount granted. The percentage of the nominal interest is fixed, it is determined when the money is requested, so it does not change during the payment of the debt.
The TIN can be found in different financial procedures such as mortgages, loans, deposit agreements, credits, among others. Said interest-only sets the remuneration obtained by the lender. This does not add other expenses or commissions of the loan, unlike the APR that does include it.
- Through the TIN it is possible to calculate the annual interest.
- The percentage is fixed and is defined from the beginning.
- Indicates the effective cost of the loan.
- It does not take into account other loan expenses.
- The percentage of the TIN does not have more information about a loan without the presence of the APR.
What is APR
APR represents the Annual Equivalent Rate. This is responsible for unifying the expenses and operating fees of a loan. The APR is the most representative percentage of financing since it provides real information on the total value to be paid.
The percentage of the Annual Equivalent Rate is more representative than the percentage of the TIN, due to the expenses, it takes into account. On the other hand, in order to calculate the APR, payment timing, commissions and certain operating expenses must be taken into account.
- It helps to compare with other loans since you can determine if the cost is higher or lower.
- Includes expenses, some of them are cancellation and opening.
- It takes into account the Nominal Interest Rate and the timing of payments. (Monthly, quarterly, among others.)
- The longer the payment term, the higher the percentage of the Annual Equivalent Rate.
- Sometimes it is mandatory to contract financial products such as non-payment insurance.
The TIN and APR are official concepts since they were granted by the Bank of Spain. In addition, they have as a law that banks and lenders indicate in their advertisements the percentages of each concept.
It is important to recognize what TIN and APR are and their relationship in loans. This way it will be easier to find financing using comparators such as Good Credit Loans and choose the loan that best suits the needs.