How to compare credit proposals with APR and total cost?

Why not seek help to compare credit proposals with more certainty? Credit intermediaries from Poupança no Minuto provide a free service that mediates between you and banks, saving you from bureaucracy and helping you make the best credit decision. But let's first understand how to compare simulations from various banks.

What is the Annual Effective Global Rate?

The Annual Percentage Rate (APR) represents the cost of credit for the customer annually as a percentage of the amount borrowed.

In itself, APR encompasses charges such as: 

• The interest;
• The commissions;
• Expenses associated with credit, such as taxes, mortgage registration, among others;  
• Required insurance.
• Maintenance commission for current account, if applicable;  
• Using an unlinked credit intermediary, their remuneration;  
• Other charges associated with the credit in question.  

There is still the Annual Nominal Rate (TAN) that represents only the interest of a loan, while the APR aggregates all charges related to credit.

You can find the APR in the pre-contractual information initially provided, through the Standardized Information Sheet (SIS), in consumer credits, under "Cost of credit", or in the Standardized European Information Sheet (SEIS), in the case of housing credit or other mortgage, under "Interest rate and other costs".  

What is the Total Amount Charged to the Consumer?

The Total Imputed Cost to the Consumer (MTIC) represents the total amount that a customer has to return to the bank throughout the entire term of the credit agreement.

This is the combination of the loan amount with the credit costs (APR - interest, commissions, taxes and other charges associated with financing).

At the moment you hire credit, it is important to analyze this measure. However, for example, in loans with a variable or mixed interest rate, the interest rate may change throughout the contract, so in these cases, the MTIC is only indicative.

MTIC can also be found in the FIN in the case of consumer credit, in "Total Amount Charged to the Consumer," and in the FINE in mortgage loans, in "Main Loan Features - Total Amount to be Repaid (MTIC)."

Note that information regarding the APRC is also mentioned in advertising campaigns that refer to an interest rate or other charges related to the cost of credit.

TAEG and MTIC: Two measures to compare credit proposals.

Both the APR and the total cost are two essential measures when comparing credit proposals, especially when the credit characteristics are similar.  

So, note that, in a loan with the same amount, term, and reimbursement method, the proposal with the lowest APR and total cost (MTIC) is the cheapest proposal for a customer.

If a proposal presents a higher interest rate, it will have a higher MTIC, as the interest rates are higher, and a proposal with a longer term will have a higher MTIC, compared to a similar credit with a shorter term.

In other words, when comparing the cost of various credit proposals, one should not only look at the spread because other credit charges may carry more weight. Credit with the lowest spread is not always the least costly for a client.

Note: It is the APR and the total cost that include all the costs of a credit contract, so they are the most realistic in terms of the value you will pay in full for the loan. By considering interest, commission costs, taxes, insurance, and other associated expenses, you will have a better idea of the cheapest credit by contrasting the value of these measures in each proposal that banks will present to you.

If you need help with this comparison and choosing the right credit proposal for you, whether cheaper or with the most suitable conditions, you can always turn to a credit intermediary.

With Poupança no Minuto as a credit intermediary, you can achieve lower need for involving products and bonuses. This information may not appear in the FINE, as banks base the value of the MTIC and the APR on the available reference. However, savings can be significant.

Hire the intermediaries of Savings in a Minute and enjoy a free service with agents available to assist you throughout the entire credit contracting process. Save money, time, and avoid bureaucracy!