Often the financial world is too infinite to be aware of all the details and details around it. Although its realization is a difficult task, it is a good idea for a modern person to be aware of and to be able to handle some concepts that would facilitate his economic status and the maintenance of the different types of budgets he manages.
In reality, often use different bank, creditor or simply commercial methods to do a particular deal or arrange a trade relationship between and a second or third person. That is why the good knowledge in this field is absolutely necessary when it is needed.
One of the concepts that often perplex and chills the blood of the uninformed is the so-called. ASD – Annual percentage rate of charge.
What it is and in which cases it is used
In practice, many people are not familiar with this term and this can be considered quite normal. Generally speaking, ASD is related to the credit products that financial institutions offer to their clients.
The annual percentage rate of charge in practice clarifies the real cost of each credit by adding to the interest rate on the credit any additional costs that are directly related to it. They can be both current and future.
In the process of calculating the Annual percentage of credit costs, all mandatory fees are included on the client’s account. These include:
- life insurance;
- approval fee;
- commission for the processing of relevant data;
- property valuation fee or other property;
- property insurance;
By following the relevant principles on which the ASD operates, a standard principle is created that would be useful to every consumer in order to be able to match the specific bids for servicing their credit to the various banks.
The key point in the Annual Cost Rate is its function to prevent banks and financial institutions from taking speculative action against their clients. This works in case of misleading advertisements and the promotion of a certain type of low interest rates on products whose fees and commissions do not meet the previously announced conditions.
In this way, each user may find himself in a situation requiring serious high charges, which would greatly add to the return of the loan.
To help you calculate your own credit, you can rely on pre-formulated formulas to help you with this task.
Let’s take an example with a credit card with a capacity of BGN 10, and the Annual Cost Rate is 15%. The principle is the following – you divide its cost into the number of days in the year – 365, then multiply the result by 30 (the approximate days in one month).
The resulting figure is multiplied by the amount of the credit and thus you get the corresponding result, which in practice represents the monthly expense for interest, which consists of various fees and commissions.
Sometimes the rate paid for the actual repayment of the loan is too small, against the background of the rest that goes for fees and service. This is also the reason many people think that a long-term payment is due to them, due in particular to the low value used to repay the principal.
Is the ASD on the loans ceiling
In practice, when borrowing a loan, the annual interest rate directs partially to the amount that will actually have to pay off. On the other hand, it is precisely the annual percentage rate of charge that specifies the whole situation.
Of particular importance is the ceiling of the specific value. Such is and it was adopted in 2014 by the Parliament of the Republic of Bulgaria and its amount should not exceed 50% of the loan amount received.