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What is the difference between annual interest rate and CAT?

Do you know at what rate you negotiated your mortgage loan? Cool. Many people are not sure if they apply the annual interest rate or the CAT.

Your mortgage loan was calculated based on an interest rate and a rate called Total Annual Cost (CAT). The CAT is the value that most affects, therefore, if you are making decisions on mortgage credit, the key is to compare the CAT of banks and funds.

The annual interest rate

The annual interest rate

The annual interest rate is the cost of money is a period equal to one year. It is determined by monetary policies. Banco de México, according to macroeconomic indicators, raises or lowers rates. Financial institutions are free to set their own rates, but generally accept the policies of the central bank.

Bank rates are set by each entity. Supply and demand, their business strategies, their financial capacity are some of the factors that influence.

The total annual cost (CAT)

bank

The CAT is equal to the interest rate plus the commissions and insurance that you will have to pay. By law, banks must announce with which CAT they will calculate loans and credit cards. That value you see in advertising is a weighted one, an approximate value of yours. The important thing when making a decision is to know the exact value that will apply to you.

Why is it important to know the difference between annual interest rate and CAT?

The intention of the standard is that you have fair and transparent comparison parameters. A bank may or may not charge more commissions than another. The point is not that. The point is how much you will charge for those commissions. And that, when buying, you can establish which rate suits you best. You know, at a lower rate, better business.

Banks charge commissions for

Banks charge commissions for

  • Consult the Credit Bureau the status of each client.
  • Socio-economic study when you apply for a credit or card
  • Recruitment or opening of bank products.
  • Appraisals
  • Granting of credit with funds.
  • Collection expenses.
  • Debtor replacement.
  • Administrative

In addition to these fees, the CAT must include life and damage insurance.

Then, the CAT reveals all the real cost that your credit will have:

Annual interest rate + bank commissions + insurance.

With this information you can already make comparisons and understand the pictures presented by a credit and transfer broker. Now you know the difference between annual interest rate and CAT.

How to Use Youth Credits to Secure Your Future?

If you are young, then you will find in the financial institutions many products designed especially for you. With them, you can underpin your personal growth, forging a tomorrow full of opportunities for success. Here’s how to use youth credits to secure your future.

 

How can credits for young people support your development?

Loans for young people are loans offered by financial institutions, designed in the youth niche. Some of the ways you can use them to support your future are the following:

Study a profession

CREDIT LOAN

Being a professional and having postgraduate studies, accredited by recognized universities, opens up a wide range of job opportunities. You can achieve this goal, by supporting the different credits for higher studies offered in the market.

These credits help you to finance the tuition expenses, as well as the maintenance expenses during the study stage. In this way, you just have to worry about presenting high academic performance, which empowers you as a future professional or specialist.

Undertake

CREDIT LOAN

In youth, it is not only easy to distinguish new niches from the market that nobody exploits, but one has the courage to undertake the adventure of conquering them. If you are a young entrepreneur, you can go to personal loans to support the development of your company.

Remember that there are financial institutions focused on supporting SMEs, which have experience in working with entrepreneurship. Therefore, apart from credit support, you will even find the appropriate technical and financial advice.

Invest

Invest

If you have some financial slack of your own, or for the support of a family member, you can use a personal mortgage loan or joint mortgage credit to invest in a property. Remember that in the medium and long term, the acquisition of real estate is usually more profitable than savings, since the good tends to revalue in the market.

How to Use 25% of Your AFP For a Mortgage Loan?

If you are affiliated with the Private Pension Fund (AFP) you can use 25% AFP for a mortgage loan. You can know the conditions and steps to follow when reading this article.

It is very easy to opt for partial financing of a mortgage loan using the funds available in your AFP. Of course, provided that said mortgage is intended for the acquisition of your first home.

 

What are the conditions required to qualify for the use of the AFP for a mortgage loan?

MORTGAGE LOAN

The conditions that you must satisfy to qualify for the use of the AFP for a mortgage loan are the following:

  • You should not own any property, either individually or through your spouse.
  • You must not be co-owner of a property registered or registered in public records, where you have a participation equal to or greater than 50%.
  • You and your spouse cannot own or co-debtor any mortgage credit.
  • You must not have previously used 25% of your AFP in a mortgage loan.

 

What are the steps to follow to use your AFP for a mortgage loan?

mortgage loan?

To use 25% of your AFP in the application for a mortgage loan, you must perform the following steps.

Select a mortgage loan at your convenience

Check among the mortgage credit options available in the Peruvian bank, which one suits you best. Compare the conditions offered by the various financial institutions, and in particular be attentive to:

  • Amount of commissions for opening and administration, and penalty for advance payments.
  • Amount of the exact monthly payment you must cancel, and if there are extraordinary fees.
  • Insurance prices for unpaid balance that you must buy to qualify for the loan.

Once the option is selected, opt for it in one of the offices of the corresponding financial institution

 

Have 25% of your AFP funds.

Have 25% of your AFP funds.

Request the available 25% of your AFP to partially or totally cancel the initial mortgage loan fee. To do this you must sign an application and affidavit, requesting the use of AFP funds. The same financial institution will provide you with these documents and will advise you on the steps to follow.

The administrator of your AFP takes up to 10 business days to process your request and respond. Therefore, in an average of 15 business days the financial institution will communicate the result of this request. If this does not apply, or requires additional information, it will give you the corresponding statement of reasons in writing.

If the request is appropriate, the administrator of your AFP will make a transfer to the bank where you made the request. Once the funds have been received, they will be considered in the initial payment of the mortgage loan.

How Are The Interests of a Credit Card Calculated?

Understanding how your credit card interests are calculated will help you make important decisions about managing your personal finances.

Financial institutions offer several alternatives or credit card categories. Sure you know them. In Peru there are internationally recognized franchises, such as Supercard and Visa. There are Gold, Platinum, Black, Classic, Infinite, Advantage, etc. In a country there are slightly more than 100 approved credit card products.

And each card has its benefits, its costs or commissions and its interests.

What does interest calculation depend on? Of the business you do.

Basically, there are three ways to finance purchases or dispose of cash with credit cards. That depends on the way in which interest is later settled.

  • Revolving or revolving credit : In this mode, each time you make a purchase or order cash, automatically, the total value will be divided by 36 parts. Each month, at least one part must be paid.
  • Payment in installments : In this mode, you can choose the number of installments to pay for the purchase or request for cash, from one to 36 (some up to 48) installments. The fee will be fixed, the same, during all the time.
  • Cash payment : in this mode, the customer chooses to pay 100% of the purchase or advance in cash, in the next billing.

     

How interest is calculated

In the revolving or revolving system there are two types of interests :

credit loan

  • The debtor or deferred interest: is the one that applies to the value of the operation from the date of purchase or effective request until the date of payment of the first installment.
  • The accrued or projected interest is that generated on the minimum revolving capital (each of the 36 parts), caused between the time period of the previous settlement and the next payment date.

The sum of both interests will be integrated into the payment of the month. If you have performed several operations, they will add up all the interests of all purchases and cash requests.

The important thing to understand in this modality is that the business has automatically deferred in 36 minimum revolving amounts, generating two interest rates.

This system will imply that the fees will be smaller than if you choose a period of six months, for example. But, of course, you will pay more in interest.

2. In installments

credit installments

The interests in this system depend on the number of days the business will take. You will choose if you want to pay three months or twelve months.

The first period will always be the same as the days elapsed between the purchase and the settlement date. The others will be equal to the days between the last payment date and the settlement.

A purchase of S / 1,000 for twelve months, may look like this:

Do not. Balance Capital subscription Interests Share
one 1000 65.29 49.01 114.3
two 934.71 68.49 45.81 114.3
3 866.22 64.05 50.25 114.3
4 802.17 74.99 39.31 114.3
5 727.18 74.74 39.56 114.3
6 652.44 77.63 36.67 114.3
7 574.81 85.1 29.2 114.3
8 489.71 87.66 26.64 114.3
9 402.05 92.43 21.87 114.3
10 309.62 98.01 16.29 114.3
eleven 211.61 103.17 11.13 114.3
12 108.44 108.44 5.86 114.3

The quota is always the same. What changes is the amortization or payment to the debt that is made each month. During the twelve months, of the total value paid, S / 114.30, a greater part is destined to the payment to capital (to amortize the debt) and less and less to interest.

The benefits of this modality? Be able to choose the number of fees to pay for the operation performed. Clearly, the smaller the period of time, the less interest will be paid.

3. Payment payment

3. Payment payment

This modality does not generate interest!

When you request that the charge be deferred to one month, 100% of the value will be paid without interest . It’s called grace period.

Some financial entities, in special times, extend the grace period.

What is the grace of this system? Do not pay interest. It is a good way to take advantage of the convenience of paying with the credit card and adding points or miles.

Of course, the most important question is missing: At what rate will interest be paid? Each card has its ASD (Annual Effective Rate), depending on the category. They vary for purchases between 19.99% to 69.99%. For cash and casino consumption, between 79.99% to 89.99%, (data for Richmind Bank Visa and Supercard as of December 2018).

In your statement you can see at what rate you are negotiating.