Affordable loans? attention to taeg, tan and contractual items

Watch out for the tan, taeg and the contractual items on expenses, for a correct convenience on any type of loan to be requested from a bank.

In order to evaluate a real convenience of any type of loan, it is necessary to check above all what has been applied by one’s own bank on interest rates (Tan and Taeg) and on the contractual items on the charges applied.

Main characteristics of Tan and Taeg: what to evaluate?

Main characteristics of Tan and Taeg: what to evaluate?

The interest rates Tan and Taeg have a very important weight on the final cost of the loan and are the first elements to check regardless of the type and duration of the loan. In the first case related to the Tan, we are talking about a nominal annual rate, requested by the credit institution on the loan amount, while in the second case related to the Taeg, we are talking about a nominal effective annual rate requested by the credit institution to cover the main expenses on the loan (such as incidental expenses or commissions in general).

As we can therefore see from a first comparison of the main rates applied on a loan, it is possible to control with minor operations the impact above all of the Tan on loan, while on the contrary the Taeg turns out to be connected to much wider elements, such as the different connected expenses to a loan. The Tan, in fact, is calculated mainly on an annual basis and in percentage terms, and is determined by the duration and the amount of the loan requested from its own credit institution and does not include accessory charges.

Table on the characteristics of Tan and Taeg

Table on the characteristics of Tan and Taeg

 

characteristic rates loans

characteristic rates loans

Tan
  • calculated on an annual basis
  • calculated in percentage terms
  • linked to the duration and amount of the loan
APR
  • calculated on an annual basis
  • calculated in percentage terms
  • defined to cover the main expenses of a loan

Conversely it is the Taeg, the element to keep under control to define a real convenience of a loan and that in principle determines the total cost of all the financing. It is always calculated on an annual basis and in percentage terms, but on the basis of specific procedures defined “by the Italian committee for credit and savings” and with specific references to the contents to be indicated for the total calculation.

By law, in fact, the Taeg must consider not only all the interests and burdens borne by the applicants for a loan, but must also be subject to a constant control (usually implemented quarterly) of the Treasury Department for not exceeding the threshold rates (also known as anti-usury rates). It is also mandatory always in relation to the Taeg, that all the items relating to the financing costs to cover the aforementioned rate are subject to an appropriate advertising information by the credit institution which provides the loan.

Contractual items of a loan: what to evaluate?

Contractual items of a loan: what to evaluate?

In addition to an assessment of the impact of Tan and Taeg on the entire loan, it is important for the purposes of a loan to be convenient or not, to also evaluate the contractual items, ie what is indicated in the loan agreement with respect to the various expenses. Above all, pay attention to any expenses in the event of early repayment of the loan (in the event of repayment of the loan before the natural expiry) of the insurance costs (ie any policies that could be requested as a further guarantee of the loan) collection costs installments or to send documents (ie additional costs for the payment of the installment on the loan or for communications to customers).

The first two items of expenditure, in particular, are among those that could affect a loan that is not convenient, as they can even reach significant costs. While the expenses for the collection of the installments or for sending the documents, concern small sums to be checked just for a complete evaluation of a convenience of a loan.