ACP stands for Annual Cost Percentage. With your AOP you can see your total cost of taking out a loan. You must read your APR as your total annual cost calculated as a percentage of the total loan amount. This means that if your APR is 10% and your total loan amount is DKK 10,000, then your total cost of raising the loan is DKK 1,000 per year.
We can therefore use the APR as an indicator of how expensive a loan is. Which allows us to compare loans. Here it is just important to compare 2 or more loans with the same parameters.
Loan providers must disclose the OPP
Loan providers are subject to the Credit Agreement Act, which states that banks and loan providers must inform the OPP in connection with loan offers. The reason for this is that it should help make it easier for the consumer to see how much it will cost to take out a loan at an annual cost.
Here is the keyword “annual cost” because although it helps to give a really good overview of what it will cost a consumer over a period of one year to have a loan. Then it has the disadvantage that it becomes difficult to read the OPOP when you apply for a quick loan in order to borrow for a shorter period than one year.
A good example is if you would like to borrow 4000 kroner for 7 days. If we say hypothetically that credit costs for this 7-day loan period will be Bank, then we can expect that the APR will be 12,995.5 percent. Which sounds like something you should never ever move into. Although we can see that the credit cost of taking out this hypothetical loan is only Bank. want to take out a loan with a loan period that is less than one year. In this example, 7 days. How many would say good to take out this mortgage loan.
We can therefore conclude that the shorter a loan period, the greater the APR. You should therefore be aware that you can reach very high APRs during short loan periods, which is very typical for when you want to borrow money with a quick loan.
The APR is not the final percentage to be paid
That being said, the OPOP is a little bit misleading. The OPP can make it much more clear in terms of how much to expect to get rid of the cost of taking out a loan. It’s just important to know how parameters are screwed together so that you can see what the number is telling.
Now that we have been on how not to misinterpret ACP, there are still some places to pay attention. There are several things that have an impact on the calculation of the OPP, which can help to give a wrong picture of reality.
The following must therefore be noted:
Deductions make it possible to take out a loan cheaper than what is actually stated as AOP. Since you can deduct interest from tax with deduction. This results in fewer costs for the full loan than the AOP suggests. This is a positive thing for you. So you have to keep in mind when you make the calculation to take out a loan, yes there are actually some interest rates that you can deduct from your annual statement. This makes it cheaper to take out the loan than what your APR actually shows you.
You also have to be aware that the APR decreases as you extend the term of a loan, but here you have to keep your tongue straight, because that does not mean that your loan will be cheaper. The thing to keep in mind is that the OPP is calculated per. years and runs one’s loan over a longer period than one year, then you may well get a distorted picture of reality. One must therefore also remember that this can go both ways. Therefore, if you take out a loan with a view to repaying it within a year, then ACP also shows a wrong picture, and in fact you will not pay as much as ACP gives up.
The conclusion on the 2 above points is that one should not always be intimidated by a high AOP until you have taken all the things into the calculations. In many cases, it may turn out that you have to spend less in total costs than what the OPP suggests you have to do. So even though the OPP gives a good overview, it can also be misleading. It is therefore necessary to know how to calculate the OPP, in order to have the full understanding of the calculation.
If you think the above seems too complicated, don’t worry. The only thing to keep in mind when looking at an AOP is that it is calculated per day. year basis. That is, these are the costs you have per. year as a percentage of its total loan amount.
What does the OPP cover?
Now we have more or less been told what the OPP is and what it stands for, as well as how we figure it out. We also know that OPP is the total cost, and here you can see which elements influence your OPP.
- end fee
- Booking fee
- document fee
- Registration fee
- Monthly / Annual Account Fees
- Management fee
- custodian Fees
- PBS fees
There are a number of points and many things to keep track of, and that is precisely why we would like to have the OPOP informed, because then we do not have to go through all those points. In conclusion, therefore, it must be that an OPP is very useful when calculating its total costs for your loan, just remember to take some things into consideration as it is not always the right picture that the OPP gives . Therefore, a good rule of thumb is to use only the OPP as an indicator, but that you have to sit down and make calculations yourself before you give up the loan. Typically, the loan providers are good at helping someone with this so you can get the right overview.