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 debt and interest on the loan, but also various commissions and fees that may be charged by the bank. Such fees include:

– Fee for opening and maintaining an account;
– Fee for issuing and servicing the loan;
– Charge for early repayment of the loan;
– Fees for additional services (for example, Borrower life insurance).

Calculation of the Total Cost of Credit:

To calculate the Total Cost of Credit, it is necessary to take into account all the commissions and fees listed 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.