The concept of interest has its origin in the Latin whose equivalence is “interesse”, from which it can also be given the meaning of importing something . It follows that the word interest is used as an indicator of a factor of an amount that occurs in relation to the cost of the loan. That is, an amount is added to the loan fund of a stipulated percentage.
Due to the nature of the word, it is used in areas related to finances such as credits, investment returns, savings, and related topics. The interest rate that is designated will depend on the types of operations that are carried out in a financial operation contract and these can be the nominal interest and the annual rate interest.
This interest rate is applied to natural and legal persons who acquire a type of credit, either for the first time or subsequently. Depending on the type of contract that is put up for negotiation, the interest percentage will be. Due to the very nature of the credit, this is usually higher than the so-called preferential interest. A client can move from one to another.
In this case we find those contributions made by the credit institution to the client itself for the provision of deposited capital. These can be savings deposits, current deposits or deposits with certain terms. It will depend on the needs and possibilities of the client to take one of these types of deposits and benefit from the interest.
In this case, it is called that when the percentage of interest that has been agreed to accumulate in the cost of the operation must be stable, that is, the same amount will be assigned indefinitely in the term that the loan liquidation lasts. For this reason, this interest rate is completely independent of the behavior of market interest rates.
The most frequent way of calculating this interest rate is based on the average interest rate of previous years. In addition, it is sought that the percentage that will be established allows the amortization to be executed around the loan in a range of fifteen years. That will be the dynamics and the criteria to calculate the fixed interest.
In this type of interest, what is actually established as an agreement is to maintain a fixed interest, what is subject to negotiation at some point in the contract is the possibility of reducing the terms or payment installments for having a good credit and mortgage behavior. The opposite scenario can also occur in which more payment installments have to be added.
It is an interest rate that is established prior agreement between the parties to the negotiation, where the maximum percentage that must be covered and in what period will be established precisely. These interests are generally stipulated when the contract is long-term. This seeks to guarantee the capital of the company that is involved in the loan transaction.
In this case, it will depend on the terms that are handled and the prior agreement stipulated in the contract, that is, during the first years, the interest that will be handled will be the fixed rate, in the following years it will change to be a fixed rate interest. variable. That is precisely what must be agreed in the operation contract, in which year the interest rate change will take place.
Those responsible for handling and managing this type of interest are those in charge of international monetary policy institutions such as the International Monetary Fund and the World Bank. These establish the criteria for assigning and managing interest such as the so-called expansive monetary policy or, otherwise, restrictive.
The idea of presenting this interest rate to the market is to generate an incentive for good clients, that is, those who optimally manage credits, as well as compliance with payments as stipulated in the contract. The preferential interests seek to help pay the debt with the intention that you can acquire another credit and be a frequent customer.
The establishment of the interest rate is closely related to the inflationary behavior of the market. This can be volatile or stable. The party that manages and assumes this type of interest in the contract must analyze the projections that the market’s own behavior develops to predict the payment capacity that it must have.
In this case the behavior is different. The interest rate percentage is closely related to the behavior and amounts of the annual interest rate projected by the current market. This means that adjustments to the percentage will be made periodically. The behavior is as follows: the variable interest will rise if the interest rate does the same and vice versa.