Payday loans: all expenses to be considered
When asking for a payday loan many people think superficially that the only costs to be faced are those related to the interest rates applied but in reality it is not so, because there are also other items of expenditure that significantly impact the amount of the monthly installment. Tan and taeg are however the most common costs, given that they represent the obvious compensation requested by banks and financial institutions for having lent a sum of money for a predetermined period of time.
The Tan, an acronym that stands for nominal annual rate, is the rate used by credit institutions to calculate the amount of installments to be paid, while the TAEG (annual percentage rate) includes all the other expenses foreseen for managing the loan.
Pay off debt in advance
And what are these ‘accessory’ expenses, but necessary for the management of the financing? Unfortunately they are not few and mainly concern the costs of investigation, the costs of collection and management of installments, the commissions, the stamp duty on the installment, the cost of periodic communications and the possible cost of closing the case in case you wish to pay off the debt in advance.
The preliminary expenses are those that the credit institution supports for the opening and management of the case, including the checks on the creditworthiness of the applicant. These charges may be charged in full in the first installment or, more reasonably, diluted over time. The costs of collection and management of installments (SIR) for single payments are rarely applied in payday loans, while they are more frequent in finalized loans.
The stamp duty on the contract is a mandatory tax that the applicant is required to pay for the various documents. Currently the amount of the stamp is 16.00 euros, to which can be added an additional 2.00 euros (always in the form of stamp) for each additional communication, if any. Some financial companies also charge a commission on the total value of the loan based on the assigned credit rating class.
The last costs concern the sending of various periodic communications (but if the sending takes place digitally, or via e-mail, nothing is paid) and, as we anticipated, the costs of practical closure : if the funding is closed early, the penalties, but never more than 1% of the remaining debt.
Finally, some institutions propose the stipulation of a credit guarantee at the time of signing the loan, but this is an optional offer that the applicant is absolutely free not to accept.