How do you calculate the cost of a loan?
Loan cost includes interest, fees and other required charges over the repayment period, not merely the advertised rate.
Definition, calculation and mechanism
In an amortizing loan, interest and principal portions change over time. An annual percentage measure helps compare offers, with taxes and insurance terms disclosed. The same installment at a different maturity can mean a different total payment.
Interpretation, examples and limits
Read prepayment, variable-rate and late-payment terms. Compare affordability relative to income, not only the lowest installment. Verify current legal and bank terms in official documents.
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