What's good for the bank is bad for the borrower
Situations often arise when borrowers, for some reason, are embarrassed to clarify with bank employees all the details of the loan agreement, thereby doing themselves a “disservice.” After all, a banking institution will never operate at a loss. Take, for example, the problem of how to correctly calculate interest on a loan.
The loan manager will be happy to provide a payment schedule with the specified amounts, but will refuse the offer to show the formula. Like, the computer calculates everything itself. But the banking program produces results that are beneficial to the bank. In order to understand for yourself, you need to remember that there are two options for repaying the borrowed amount: in equal installments every month and charging interest on the actual balance monthly.
If the terms of the loan agreement indicate that the loan is repaid every month in equal installments (both interest and part of the loan are taken into account in the obligatory payment), the so-called “annuity” formula must be used for the calculation: Payment = (loan amount * interest rate / 12) / (1-1/(1+ interest rate/12) * number of months). If we substitute conditional figures into the formula: loan size - 200 thousand rubles, interest rate - 21%, it turns out that the borrower will give the bank 18.62 thousand rubles every month. In this case, the total cost of the loan will be equal to 223.48 thousand rubles.
With this scheme for calculating interest amounts for using a loan, you need to remember that they are recalculated monthly, as the size of the “loan body” changes. Payment = (loan amount/number of months) + debt balance * interest rate / 12. If we substitute the above values into the formula, it turns out that in the first month the borrower will pay 20.16 thousand rubles to the bank’s cash desk. However, in the second - already 19.87 thousand rubles. And the total amount will be 222.75 thousand rubles. Thus, calculations using the second formula are more preferable for the client. Realizing this, many banks do not leave the right to choose, imposing an annuity system.
As noted above, banks quite often play tricks, focusing the borrower’s attention on some sides of the transaction, while carefully keeping silent about others. In this case, the client agrees with all clauses of the contract. For example, the notorious commissions paid by the client for a bunch of different operations can be taken into account in the loan amount, increasing it. Or insurance. She also plays against the client. Moreover, the latter “feeds” not only the bank, but also the insurance company. And there can be many such nuances.
Very simple. Read the contract carefully, find out from the manager about all the pitfalls (don’t be shy to ask) and calculate the amounts yourself using the formulas given in the article. The work only takes a couple of hours, but you can save a lot of nerves and time in the future.