When comparing loan offers, most people pay attention primarily to the interest rate. However, not everyone is aware that this is only part of the total cost of the loan. Unfortunately, offers that tempt with attractive interest rates do not have to be beneficial for us. To find out the total cost of a cash loan, you should rather pay attention to the APRC.
What is the APRC?
APRC is the abbreviation for Actual Annual Interest Rate. It is a percentage value that shows the total cost of the cash loan expressed annually. Pursuant to the Act of May 12, 2011, banks and non-banking companies are required to provide the APRC. This is not only about contracts, but also offers and advertising. This solution aims to eliminate misleading practices and to confuse the customer as to the total cost of the loan. The Annual Real Interest Rate allows you to effectively compare individual offers. That is why it is used in algorithms of cash rankings or consumer credit rankings. The only difficulty associated with using this indicator is that the interest rate is calculated on an annual basis, which is sometimes uncomfortable for some payday loans.
Where does the difference between APRC and interest come from?
What does the total cost of the cash loan cover? In the case of a cash loan, it can be used for any purpose we choose. That is why the APRC can be a very convenient indicator to visualize the real cost. In some cases, the difference between the Real Annual Interest Rate and the loan interest rate is very large. This is due to the fact that banks very often charge various types of additional fees related to loans granted. The standard has already become a commission, the amount of which, depending on the offer, can vary greatly. Banks may also apply other types of fees and margins that may not be obvious to the client. When granting loans for higher amounts, it is very common practice to require the customer to purchase additional insurance.