What types of interest rate are there in a consumer loan?

Consumer loans are financial instruments that can bring us closer to our personal goals when we do not have immediate resources. Generally, we always focus on the amount to be received, but just as important as this point should be the interest rate. Here we will explain why.

The interest rate is the cost of money that a financial institution will grant you. That is to say, it is the amount that you will have to pay for the use of that financing for a certain term. If you do not take into account the interest rate, you will not be able to compare options or choose the most convenient credit objectively. This could end up becoming a headache and a problem for your finances.

How does each type of interest rate influence a consumer credit?

money loan

There is not a single type of interest rate, there are:

  • The nominal interest rate

  • The conventional maximum interest rate

  • The effective rate

Each influences the total cost of consumer credit, so you must have a clear understanding of its characteristics.

  1. The nominal interest rate refers to the profitability obtained, taking into account only the principal.

  2. The conventional interest rate is the highest percentage at which you can get credit.

  3. The effective interest rate is the percentage that would be applied to an amount of money in a specific term.

Now, let’s see the characteristics of each type of rate and how they influence your consumer credit when paying.

Nominal interest rate

The nominal interest rate is fixed taking into account the term and the capital, it does not include administrative expenses or commissions. Each financial institution establishes the value of this type of rate and is usually based on the country economic factors and benchmarks.

Conventional maximum rate

The conventional maximum rate represents the maximum percentage that the financial institution can charge you for credits below 200 UF (promotion unit), and that cover operations over 90 days. You can check the value of the conventional maximum rate on the website of the Superintendency of Banks and Financial Institutions.

Effective rate

The effective rate includes more expenses than the nominal rate and depending on the financial entity, it can appear in the interest rate types on a monthly or annual basis.

What types of interest rate are there in a consumer loan?

What types of interest rate are there in a consumer loan?

Once you are clear about the types of interest rates, you should analyze other important aspects before requesting a consumer credit. Among them, your personal financial situation, since your ability to pay for the financing will depend on it. In this sense, it is essential that you take into account your fixed and variable income, in order to know how much you can allocate to the payment of debts. On the other hand, it is important that you evaluate all the credit options that the market offers and thus choose the most convenient for you.

Having a positive credit history will open doors with financial institutions for more financing

money loan

Remember that in the financial market, you can not only obtain credits through traditional banking. Currently, you have an excellent alternative to access consumer credit and excellent interest rates. Do you know what this is about? Find out below. Have you tried to access any financing in an expedited way and have not had any luck? Look no further Oriencoop we offer you the solution you need and within reach of your financial requirements. Not only do we offer you the opportunity to get the money you need quickly and safely, we also have installment payment plans with less tax collection. Excellent, right?

Conclusion

Having financing is the best way to carry out projects, not only on a personal level, but also in business. However, in order to choose the best alternative, it is essential that you know all the elements that make up the credit that we will obtain. Knowing these data will make you more efficient in paying your debt. In addition, you can fully comply with the financial institution, which will enhance your reputation as a responsible customer. In order for the credit to be viable and not affect your personal finances, it is vital to be aware of the types of interest rates that each credit can have.

With this information we will have a more accurate understanding of the true cost of the loan and know if we can afford it. Being aware of all aspects of consumer credit is essential to keep your finances under control. Don’t let ignorance of interest rates become an obstacle and end up damaging your financial stability. ALWAYS find out, compare and choose your credit with interest rates according to your needs.