TIN and APR
TIN and APR, what mean these initials and how affect to your financial operations
The TIN that of the APR they are two percentages that are applied to different operations financial, and that involve the payment or charge of a part of the money that it intervenes in this operation.
The TIN is the Nominal Interest rate, interest that generates the money from a financial operation in a certain period of time, without discounting the inflation.
The APR is the Equivalent Annual Rate (also the Effective end Annual Rate is used), percentage of annual interest that is must to pay, or to charge, with financial products that entail interest, as a loan, for example.
How to differentiate TIN and APR?
The TIN it is the type of one interest that is paid to the company that it provides the money. It can be daily, weekly, monthly or quarterly, according to the type of product to that which is applied. For example, in a personal loan, the TIN usually is monthly, since the interest rate is applied to every fee that the client pays to the bank month by month, that is, the amount is summed to give back. However, in the case of the credit cards, the TIN can charge for every day that the bank provides the money.
The APR it is the rate that it shows the annual cost that it has the operation for the client, although payments are done with a smaller frequency. It expresses the interest that is going to generate a deposit or another investment product, or the cost that it is going to have to pay for a credit. This allows being able to compare offers of different companies, both for saving and for investment. It is the indicator that it is necessary to take into account to know the cost or actual output of a financial product and is calculated on the total of the money of the operations of saving and investment.
- APR in investment: is applied to investment funds, deposits, remunerated accounts, pension plans, etc. It indicates the annual gross return of a financial product. Given the enormous products variety and its particularities: amounts to be invested, terms of deposit of the money, frequency of deposit of the interest..., the APR allows comparing different products to know which is more profitable. Is expressed in a percentage that it indicates the interest that the user is going to receive at the end of the year.
- APR in saving: is applied to credits, mortgage loans and deposits banking. Let alone cancellation is the APR, less interest will have to pay the client for the lent money.
How the APR is calculated?
The Equivalent Annual Rate is calculated following one established mathematical formula by the Banco de España: TAE= (1+ r/f)f -1 that they must use, and to announce, all companies.
This formula, in which "r" is the nominal interest rate (TIN) and "f" the fee-paying frequency of the terms, includes:
- The TIN.
- The start-up fee of the operation.
- The fee of cancellation, partial or total.
- The fee of the study that approves the operation.
- Years that is going to last the operation.
- The frequency of the payments (monthly or quarterly, usually).
The formula allows doing a calculation of the compound interest integrating interest that they leave obtaining from monthly, quarterly or half-yearly way to obtain a final figure: the annual fixed percentage that it indicates the return of the product.
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