We are already so accustomed to the idea of interest on installments, late accounts, loans, etc., that it is strange to ask why the interest exists. Have you ever wondered?
What is interest?
Explaining as simply as possible, interest is a value paid for having rented a money.
For example: A store is selling a product on time, the amount you would pay in the present would be different from the value in the future, this happens because of inflation. Just think: 200 reais today are not worth as much as a few months ago, is not it?
Interest also exists as a precautionary measure to ensure that people do not fail to pay for the product or service they have purchased.
Understanding more about interest
We have all heard terms such as interest rates, simple interest, and compound interest. Let’s understand them?
– Interest rates:
It is money in percentages of values that will be returned to those who have sold some product or service over time. So if the interest rate of a service is 3%, for every 100 reais borrowed, the customer will have to pay 3 reais more on the value.
– Simple interest:
Interest rate applied on initial debt amount, very unusual to be practiced. Example: If the interest is 7% monthly and you got 100 reais borrowed, your debt will be calculated based on the 100 reais, so, monthly it will only grow 7 reais.
– Compound interest:
The most commonly used interest rate is when you charge a month-over-month fee on top of the new amount, already with accrued interest. Assuming that interest is 5%, when borrowing 100 reais, in the second month the debt would be 5% over 105 reais, instead of 100 reais.
In short, do not believe in interest-free installments
Probably the interest rate is already embedded in the value of the product or service. But to not risk your money, the safest, quickest and no-bureaucratic alternative to online personal loan, you only have here with the Financial Group.