What is the Total Cost of Credit?

The Total Cost of Credit is an important indicator that allows the Borrower to assess all expenses associated with obtaining and servicing a credit product.

The Total Cost of Credit includes not only the principal amount of the debt and interest on the loan, but also various fees and charges that may be imposed by the bank. Such charges include:

– Fee for opening and maintaining an account;
– Fee for granting and servicing the loan;
– Fee for early repayment of the loan;
– Fees for additional services (for example, the borrower's life insurance).

Calculation of the Total Cost of Credit:

In order to calculate the Total Cost of Credit, it is necessary to take into account all the fees and charges specified above. The formula for calculating the Total Cost of Credit is as follows:

Total Cost of Credit = i * (1 + i)^n / (1 + i)^n - 1, where i is the annual interest rate, n is the loan term in years.