The main question that worries the borrower is how much he will eventually have to pay the bank for using his funds. The declared interest for the uninitiated often does not reflect the real picture. The effective interest rate (EIR) may be 2-3 times higher than the declared one.
Instructions
Step 1
The formula for calculating the EPS was proposed by the Central Bank in Regulation No. 254-P as amended on 2007-01-07. Despite the complexity of the above calculations, computer users, in particular an office suite from Microsoft, have a big advantage. In Excel, among the financial functions, there is a formula for calculating the net internal rate of return. In the English version it is XIRR, in the Russian version it is "CHISTVNDOH".
Step 2
In letter No. 175-T dated December 26, 2006, the Central Bank specifies how exactly the calculation can be made using examples. The effective interest rate on a loan can only be calculated based on specific data. This is the amount, the size of the down payment, the date of the loan, its term, the frequency of payments and the principle of their calculation.
Step 3
Example 1. The conditions of a loan are as follows: - ∑ loan - 12 660 rubles; - type of payments - annuity; -% rate - 29% per annum; - service fee - 1.9% of the loan amount monthly; - loan term - 12 months; - date of issue of the loan - 2012-17-04.
Step 4
The effective interest rate can be calculated after the bank provides the loan repayment table. Using it, create a table in Excel similar to that shown in Table 1. According to the logic of a common man in the street, the overpayment will be 4959.16 rubles, which is only 39.17% per annum. However, the effective interest rate will be around 90% per annum. To get this figure, in cell F19, perform the following manipulations: "Insert" - "Function" - "Financial" - "NETWORK". In the "Values" argument, select the entire column "Payment Amount" except for "Total", in the "Dates" argument - the entire column "Payment Dates". The "Pred" (estimated return on investment) argument can be omitted. So, the effective interest rate in this case will be 89, 78% per annum
Step 5
Example 2. The initial data are the same, but the bank charges a one-time fee of 1.9% per year. Accordingly, the loan repayment schedule will be somewhat different (see Table 2) 12660 x 1.9% x 12 = 2886 rubles. Display this amount in the payment amount column: add 2886 to the original -12660. You get -9774. You will immediately see that the EPS will rise to almost 124%
Step 6
Example 3. The bank offers a loan without a fee for maintaining a loan account. It would seem that in this case the declared rate should be equal to the effective one. But even here everything turns out to be not so simple. Instead of the declared 29% per annum, you will receive 33.1%. Did the bank deceive you? Not at all. By default, the “NETWORK” function sets an assumed yield of 10% per annum. It turns out that the bank receives the payment amount every month, taking into account its reinvestment. And even though it is difficult for a simple layman to understand why in the end he will pay more than stated, the actions of the bank are completely legal.
