If you have ever heard about the TIN and the APR but do not really know what those terms are, we will briefly explain What does it mean to have a TIN interest or TAE type and how both are calculated. Financial products, such as deposits or loans, are associated with two types of interest: TIN and TAE. It is important to understand the difference between them, because the fact of not being surprised when facing said loan depends on it.
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What is the TIN
He TIN is a fixed percentage agreed as a concept of payment of a loan. It represents the percentage received by the bank as a result of the allocation of funds. The TAE is the interest rate that represents the effective cost or yield of the product.
In other words, the TIN is the interest rate used and communicated by banks in deposit, loan, credit and mortgage contracts and reflects the interest paid for the change in the value of the currency over a period of time.
The nominal interest rate (TIN) is a fixed percentage agreed as a concept of payment of the borrowed funds. It represents the percentage of money received by the bank by transfer.
For example, in a mortgage, the monthly TIN is obtained by adding the Euribor to the differential that the bank has applied.
Therefore, interest rates reflect the effective cost.
What is the SAT
On the contrary, the APR is calculated according to a standardized mathematical formula that takes into account the nominal interest rate of the operation, the payment frequency (monthly, quarterly, semi-annually, etc.), the cancellation or amortization of bank commissions and surgical expenses. . In addition, it is necessary to consider if there are other expenses, such as opening commissions.
In the case of loans and mortgages, the TAE does not include the calculation of the effective cost of some concepts, such as fees, or costs that can be avoided when using contractual power; fees paid to third parties, or insurance or other credit
Banking law requires financial institutions to notify customers and record APRs in various places, such as in contracts, in information before signing a contract, and in advertisements for their products.
Mortgages and loans: APR
The annual equivalent interest rate for loans and mortgages does not include the calculation of certain costs, such as notarization, insurance or other products related to operations.
However, the banks' own regulations and legislation require banks to notify customers and clearly reflect the APR in their contracts and advertising or promotional items.
What are the differences between the TIN and the APR?
Obviously, both types require financial institutions to include all the conditions of the credit business, but the difference between the TIN nominal interest rate and the annual APR is very sensitive.
1. Information bias
Although both indicators provide valuable information to consumers, the TIN provides almost no relevant data on the nature of the loan.
On the other hand, since APR provides all the relevant data on the operation, it is considered a more valuable element to determine the conditions of the contract product, its contribution to the investment or the real cost of the loan.
2. Periodicity and performance
Another big difference between the TIN and the APR of a deposit is that the TIN does not have to be annual; In addition, the difference between the TAE and the TIN of a personal loan is greater than that of a mortgage, which is very common. By contrast, the annual interest rate on a deposit or savings account is typically lower.
As a consumer, understanding the difference between TIN and APR is essential to choose the best conditions for bank loans.
How is it calculated in TIN and APR?
We could give you a formula with which to calculate these two types of interest, but with the number of online tools that exist today, you will simply have to fill in the amount, duration and percentage data. We leave you one in case you need to clear up your doubts, by clicking here.
If you liked this article and you still belong to the traditional bank, consider reading about the online banks and how can you change the way you manage your finances personal.
