PRACTICAL GUIDE · UTILIA WORK
How to calculate the real cost of a loan
Understand instalments, interest, fees and the total amount repaid.
1 min read
Review the amount and term
A longer term may reduce the monthly payment, but usually means paying more interest overall.
Distinguish nominal and effective rates
The nominal rate describes the stated interest rate. An effective annual rate such as Spain's TAE includes certain costs and payment timing, helping compare similar offers. Definitions depend on the jurisdiction.
Add the costs
Check arrangement fees, required insurance and other linked products.
Calculate total repayment
Multiply each regular payment by the number of payments and add charges not already included.
Check your budget
Make sure you could afford the payment even if unexpected expenses arise.
Put it into practice
Start with one step and review the numbers regularly as your circumstances change.
General educational information. Examples are illustrative; check the conditions and rules applicable to your situation before making important decisions.
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