When hiring a loan or financing, the consumer pays other expenses in addition to the interest, which may be included and change the final value. Knowing the total cost effective allows you to compare credit offers better.
The total effective cost, or CET, is the total of charges and expenses to be paid by the customer in a financial transaction.
In addition to the interest charged by the institutions, taxes, fees, insurance, registration costs, and others are added, increasing the final rate of the operation. The CET takes into account all these expenses and gives the actual value that will be charged.
Established by the National Monetary Council through Resolution 3,517 of December 6, 2007, in order to provide greater transparency in financial transactions, the CET is expressed as an annual percentage. By law, all institutions are required to inform the CET.
The interest rate is not the only thing to evaluate when it comes to taking out a loan. Different banks and financial institutions may offer the same interest rate, but the total effective cost may vary.
This is because each institution has the freedom to institute the amount it wants for other expenses included, such as tariffs, taxes, insurance, registration, among others.
The aim of CET is to facilitate and give transparency to financial transactions. With it the consumer can choose the best line of credit, because not always lower interest represents the best deal.
When you do a real estate financing simulation, the Total Effective Cost often does not appear. Lay people do not know that this value will not be the total cost. Especially in long financings, as is the case of real estate, any extra value will make a significant difference in the end.
In real estate financing, in addition to the interest rate charged by each institution, two other insurances are included in the financing: Death or Permanent Disability (MIP) and Physical Property Damage (DFI).
Other fees can still be added, such as the registration fee, good evaluation, registrations, IOF and others. For this reason it is necessary to know not only the interest, but the Total Effective Cost (TSC) of the financing.
When comparing loans, not always the one with the lowest interest rate or 0% interest is the most advantageous. This is because other fees and taxes are included in this transaction.
The “no-interest” offer will actually be charging other charges, but the word “no interest” usually attracts the consumer. By law, all financial institutions must inform the CET, which must also be in the commercials.