You are looking for a cheap consumer credit, then you will have to compare the cost of the different credits that you will be offered. We will therefore explain several calculation methods that will allow you to easily find a cheap consumer credit.
What is the cost of a consumer loan?
The easiest way to compare different consumer credit contracts that you will be offered is to compare the overall cost of credit.
This amount is actually made up of everything you need to pay in addition to the amount you borrowed. So there is the cost of interest, but also the cost of insurance, and even the filing fees. To calculate the overall cost of a loan, all you have to do is add up and deduct the amount you borrow. It is therefore necessary to multiply the amount of the monthly payments (insurance included) by the number of months, without forgetting the administrative costs. You will then need to subtract from this amount the amount you borrowed.
Calculate the cost of credit by having the interest rate
Most lending institutions put their interest rates forward, but this is not very telling information for the borrower. To get an idea of the cost of credit, it is better to calculate the amount of the monthly payment. However, it is possible to calculate the monthly payment of a loan by having the TEG (Annual Global Effective Rate).
- Use a credit calculator
The quickest way to calculate the monthly loan amount is to use a credit calculator. A credit calculator is in the form of a program accessible from a web page, it suffices to fill in the necessary information, the amount of the credit, the duration of the credit, the Annual Global Effective Rate and possibly the amount of insurance.
The program then automatically calculates the amount of the monthly payment and the cost of the credit.
- Manually calculate the cost of credit
It is also possible to manually calculate the amount of the monthly payment and therefore the cost of the credit, by having the necessary information.
- Amount borrowed: E
- The number of monthly payments to be paid: m
- The annual global workforce rate: T
The following formula should therefore be used:
Amount of monthly payment = (E x (T / 12)) / (1- (1+ (T / 12) exp m)
Once the amount of the monthly payment has been calculated, simply apply the first formula to calculate the total cost of the loan.
Be careful to compare the real rate
To compare the different offers quickly and easily find cheap consumer credit, the easiest way is to compare the rates. On the other hand, for the comparison to be really effective, it is necessary to look at the Global Effective Rate or TEG.
The TEG is an annual rate into which all of the compulsory fees have been integrated. The TEG therefore includes interest on credit, but also administrative fees and compulsory insurance costs. It therefore really makes it possible to assess the difference in cost of credit between the different offers.