As we explained in the first part of this series, the main cost of the money you borrow is the interest rate, a variable determined by market conditions and that, generally, can be modified throughout the life of the loan .
However, there are other costs associated with formal credit that depend exclusively on the policies implemented by each financial entity. Sometimes, depending on the size of the pocket, they can become important charges and it is advisable to have them budgeted.
The good news is that they are completely predictable, given that they are fixed or unique amounts or proportions that are established in the contract between the user and the bank.
What costs are we talking about?
The terms may seem familiar to you: closing expenses, legal expenses, capital payment penalty, early balance penalty, and life, unemployment, vehicle or housing insurance. Below we explain what each expense consists of and what type of loans is usually associated.
In addition to the interest rate, in our comparator you can obtain information about the other costs associated with each loan
These are charges generated during the administrative management of the loan you are acquiring. In the case of mortgage and vehicle loans, the cost of appraisal of the asset is an example of closing costs. They usually represent between 2% and 5% of the total loan amount.
Refers to the expenses incurred for the preparation and notarization of the contract between the user and the financial institution, and any other legal document that is necessary, such as acts of transfers or change of holder in cases of credits Mortgage and vehicle. Banks usually carry out all the procedures and reflect the cost in the loan amount.
Penalty for payment to the capital:
In many loans (mortgages, vehicles, personal or others) any extraordinary payment made to the capital is punished, under the logic of which it is a damage for the financial entity because it reduces the lifetime of the credit and, therefore, the amount they will end up earning for interest.
There are products in which the payment to the capital is free of penalty as long as it does not exceed a specific percentage of the total borrowed. For example, the debtor can pay up to 40% of the loan amount without penalty (this must be fixed in the contract), but, from this limit, he will have to assume those charges if he wants to continue making extraordinary payments.
Penalty for early balance :
It is the charge that is generated in some loans when the debtor makes payments to the capital that exceed the proportion established in the contract as free of penalty for extraordinary payment. Taking the previous example, an early balance penalty would be generated from the moment the extraordinary payments exceed 40% of the initial value of the loan.
Penalty for delay or default:
Throughout the life of the loan it is also possible that the debtor has to pay penalty for late payment or late payment. It is generated exclusively by the debtor’s responsibility, when for any reason he fails to comply with his payment commitment. Its value or proportion will vary according to the policies applied by each entity to specific credit products.
It is insurance that you contract as a requirement of mortgage loans, mainly. Cover your loan in case of death. Some entities charge it at the time of disbursing the loan.
It is unusual as a requirement, but some personal loans and for the purchase of real estate contemplate it. It is a policy that covers a certain amount of loan installments in case you lose your job.
It is associated with vehicle credits as an essential requirement. It covers damage to the vehicle in case of accidents that are the responsibility of third parties.
Eye, maybe this is the insurance associated with loans that generates more confusion. It is a policy required for mortgage loans with which the debt is protected, not housing. Thus, in the event that the home is destroyed by a natural phenomenon, the insurance pays the bank the amount that the debtor has left to pay, but does not cover the debtor the damages for the loss of the home.