Everyday money · General financial education

Total cost of credit

Total cost of credit means what you pay beyond the principal borrowed: interest, compulsory fees and whatever local rules put into the disclosure. The monthly payment alone is only a slice.

In more detail

APR / Effektivzins help compare compulsory costs on a yearly basis. Total cost and total amount show the absolute sum over the term. A longer term at a positive rate often lowers the payment and typically raises total interest. Optional insurance often sits beside the advertised figure.

Background

What enters total cost and APR depends on the jurisdiction. Compare like with like: similar amount, similar term, the same extras. Finmon does not rate offers. Read total amount, term and APR / Effektivzins together.

An example

Two offers: same principal. A has a higher payment, shorter term, lower total amount. B has a lower payment, longer term, higher total amount. The payment alone does not settle the comparison.

A common misconception

The monthly payment is the price of the loan.

The payment is a slice. Total cost and term describe the full price better.

Source: BaFin · Konsumentenkredite vergleichen. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.