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When it comes to borrowing money, there are two main things to consider: the Nominal Interest Rate (NIR), which is the price we pay for the money we borrow, and the Annual Percentage Rate (APR), which includes commissions, the term of the operation and the NIR of the loan we want to apply for. Next, we are going to know all the details of how both concepts affect a loan or mortgage.
The Nominal Interest Rate or NIR is the price we pay for a loan, that is to say, the money we have to pay the bank for the capital borrowed. The NIR is, therefore, a specific percentage of the total amount lent by a bank to establish the parameters of a financial operation such as a mortgage loan. In general, the NIR is calculated on a monthly basis. The NIR should be indicated in any contract for banking products such as deposits, loans, credits or mortgages, since it is the price we are paying for them, as explained in this content of Finance for Mortals.
What is tin
When taking out a personal loan or any other financial product, it is normal that you have seen the acronyms APR and NIR. But, do you know their differences? In the following article we reveal them to you.
To know what you will really pay for a loan, a mortgage or any other financial product, you need to know the most basic concepts so you won’t have any doubts when you are negotiating or about to accept. Two of the most common terms are TIN and APR and you need to know the differences.
Starting with TIN (nominal interest rate), it is the fixed percentage that is negotiated as a concept of payment for the money that is lent. It is the one that indicates what percentage the financial institution receives for lending the money.
The NIR is the rate used by banks to reflect the interest payment. This figure indicates the real interests that we are going to pay, to know with total exactitude the amount to return to the bank.
In the case of Euribor, to obtain the monthly TIN it will be necessary to add the Euribor and the differential applied by the bank, to obtain the total amount. Also, it does not include associated expenses, only the interest, which does not have to be annual.
Tin in spanish
The TIN is the fixed percentage that is agreed as a payment concept for the borrowed money. It indicates the percentage that the bank receives for lending the money. While the APR is the interest rate that indicates the cost or effective yield of a product.
The Annual Percentage Rate, or APR, is a percentage indicator that allows customers looking for a mortgage to compare different offers and thus have a reference of the real cost of the mortgage.
In essence, the APR is the rate that banks use and communicate to us in contracts for deposits, deposits, loans, credits and mortgages, and which reflects the payment of interest for the change in the value of money over a period of time.
On the other hand, the APR is calculated according to a standardized mathematical formula that takes into account the nominal interest rate of the operation, the frequency of payments (monthly, quarterly, half-yearly, etc.), the bank commissions for cancellation or amortization, and the expenses of the operation. In addition, it will be necessary to take into account if there are other expenses such as, for example, the opening commission.
A loan or financing gives you the ability to start activities that otherwise you would not be able to do in a short period of time. But at the same time, you must know the conditions of the financial product to which you are going to adhere, to do it with total security and without surprises. For this you must know the difference between TIN and APR.
When applying for a personal loan, you must take into account the payment conditions for the contracted service. The main element that marks the «price of a loan» is the nominal interest. Or in other words, what you must pay to the financial entity or bank for lending you an amount of money in advance. Well, technically, this concept is the so-called NIR.
We said before that the interest rate that marks the main conditions of the loan is the TIN. But there are also other concepts that can be associated with the contracting. For example, expenses and commissions. The APR tries to include these concepts.