Too high interest on financing? Understand how interest rates work on financing and which are the most common types of financing.
Most people use financing when they buy their property, however, few know the interest rate.
When the installments paid for the property are added together, it turns out that the amount paid is much greater than the value of the property. This ends up discouraging some people during the financing process.
The financing term can also be up to a few decades. Do you think interest rates are too high on your home loan?
Find out a little more about bank financing and understand what makes the interest rate so high.
Difference between financing and loan
Firstly, the financing has a specific objective, so the amount raised must be used for that stated objective. So, if it's real estate, you can't use it to buy a car.
When you lend money, the amount is released and you choose what you will do with it. It could be shopping, paying off debts, buying a car, whatever you want.
The bank analyzes the conditions you have to pay before lending you the money. In other words, if the installment will not compromise your income too much.
Therefore, your loan may or may not be released, due to this analysis that the bank carries out. However, it is important to understand that they are different lines of credit.
What are the most common financing options?
Real estate financing is the most common, the Datafolha institute published research on people's interest in financing the purchase of a property.
More than half of people said that to buy their property they would need financing. Workers who have a Guarantee Fund can use the amount to pay off the property.
As well as, for the payment of up to 80% of the installment value. You can finance a residential or commercial property, new or used.
The second most common financing is vehicle financing, this is a highly sought after option when purchasing vehicles.
Too high interest on financing? What are the interest rates on financing?
High interest rates are the main cause of people complaining when financing a property, even a vehicle.
There are two most common tables for financing, Price and SAC. Your financing is probably in one of these tables.
When the system used is Price, the installments remain fixed, however, the interest is decreasing, while the amortizations are increasing.
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Thus, while amortization increases, interest gradually decreases. This is the most used table to finance vehicles. If you take out financing in this table, pay attention to the index whether it is pre- or post-fixed.
After all, if it is pre-fixed, the installments will not be readjusted during the financing. While the post-fixed rate may be readjusted, as everything depends on the condition of the country's economy.
In the SAC table, both interest and installments are decreasing, so your installment drops month by month. Thus, at the beginning the installments are larger, but they decrease over time.
Total effective cost
Finally, when you do your financing simulation, pay attention to this factor, as this is the cost of your property.
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This includes interest, in addition to the administrative fee, as well as charges, taxes and insurance. This way, you can know exactly what you are paying for your property.
To facilitate your financing calculation, the Central Bank has on its website the Citizen Calculator. Use this tool to calculate your financing.
Before taking out financing, do your planning, try to raise a good down payment, simulate in several banks and finally, use the amount well.
