The solution to our worries seems to be the ordinary ability to compare which numerical value is greater. Simple isn’t it? It is difficult to check if Bank X’s offer with a given interest rate, commission, and any other costs is combined with a loan from company Y on different parameters. So is there not one objective measure that would allow us to compare them correctly? Just review the APRC with representative examples of loan offers.
Actual Annual Interest Rate
(APRC) is a measure that combines all cost credit parameters in one place and presents on an annual basis. In other words, it takes into account the amount of commission rate charged, interest accrued and other possible fees such as service charges or insurance.
A representative example is a product that is supposed to bring us closer to the average values for our loan. Pursuant to the Act on consumer credit, values that the bank expects to conclude at least 2/3 of contracts of a given type are to be included here. In other words, only at most 1/3 of the remaining contracts (a minority) will have different conditions (cheaper or more expensive).
Therefore, the comparison can be simplified in that the compared APRC value from a representative example of one loan with the same value from the competition and a better one, i.e. for us customers the more preferred option is the value that is lower. However, are there no hidden hooks here? Unfortunately, there are … What?
Firstly, the APRC value is lower
even at higher price parameters, i.e. interest and/or commission, if we consider a longer repayment period for a given loan …
Secondly – when setting a representative example, the loan company or bank may “shoot through” what it expects to conclude in at least 2/3 of the contracts signed and provide lower than actual values and on this basis, someone makes a purchasing decision …
Thirdly, loan examples are represented in each financial institution and it is difficult to compare these values one to one …
The conclusion from the above study is that it would be best for us to compare the loans offered ourselves.