TIN is the acronym of Nominal Interest Rate and is a percentage established as payment for borrowed money.
In addition to the TIN, there is the APR, which is the Annual Equivalent Rate and indicates the effective cost of a product.
Simply explained, TIN is the percentage of interest that banks use for the loans they give us.
Also, you should know that just knowing the TIN does not have the total cost of the loan.
As for the times to pay the TIN, we have:
Although the most common is to make these payments on a monthly basis, it is a decision you make with the bank.
It is important that you know that the amount in your payments varies according to the time you have to pay them.
The more time they give you to pay, the greater the total amount of interest.
Does TIN apply to everything you buy on credit?
Although it is related to all your purchases, it does not influence each cost, because it is the percentage that remains for the bank.
In other words, that Nominal Interest Rate is applied to the total loan, not to each item that you are going to buy with it.
Let’s go with an example in numbers:
If you ask for a loan of 200,000 pesos to pay in a year and the annual TIN is of 8.5% it means that you will pay 17,000 pesos of interest.
In the same way, you must choose wisely how long you will pay the interest, we explain why:
for a loan of 10,000 pesos with an annual TIN of 6% you will end up paying 600 pesos of interest.
However, if the interest rate is daily, you would end up paying 219,000, yes, it seems crazy! but that’s why we tell you that you should analyze it well.
In simple words: it is not the same to pay 6% in 12 installments than to pay 6% in 365 installments.
All this, in turn, has caused most banks to establish a one-year payment period.
Do all banks have the same percentage?
This variable is another thing to take into account.
The Nominal Interest Rate may vary depending on the bank, therefore, we recommend that you quote from different companies.
Sometimes, your credit history can influence this percentage. how? Here we explain it to you:
- If the bank sees that you have outstanding debts or delays, it is likely that they will place a high interest rate on you.
- In the same way, they may not allow you so many installments to pay, but they want you to pay in a short time.
- If your record is good, you will have more freedom to pay, since the bank will trust you.
How many types of interest rates are there?
Interest rates have different applications depending on the system that applies them.
For example, in the banking context we work with different interest rates:
- Active interest rate, which is the percentage that banks charge for different types of credit services.
- Passive interest rate, where the percentage is paid by a banking institution to whom he deposits some money.
What determines interest rates?
This is a variant where each country is autonomous, however in the case of Mexico the main determinants are:
- The production
- The money
Let’s talk about the Mexican reality
Interest rates in Mexico are currently the highest in Latin America, and this makes it increasingly expensive and more difficult to apply to a bank loan.
This, in turn, limits consumption and decreases productive investment.
In December 2016, the Bank of Mexico increased the base of the benchmark interest rates by 25 points. What also affects the banks.
Therefore, as the cost increases for banks or financial institutions, it also increases for users.
Which markets are most affected by this increase? the automotive, the housing and the high-value technological products.
All these aspects affect both the country and the community, because there are fewer purchases, the supply increases and demand decreases and the less income the financial institutions receive, the less loans they can make.
In conclusion, it is important to be aware of all the changes in economic and financial matters, because many times although we believe that they will not affect us, they do influence even directly in our lives.