Simplified method for calculating the real annual interest rate on loans and its use.

Abstract

Currently, the interest rate, which historically was considered the sole indicator of the cost of a loan, sometimes becomes not even the main item of expenses due to the existence of various additional commissions that the client has to pay. At the same time, the legislation does not specify the method of calculating the real interest rate, but only the method of its verification. The object of the research is the lending processes. The subject of the research is the methods and ways of calculating the effective interest rate on loans. The purpose of the article is to create a simplified methodology for calculating the effective rate under a credit agreement using standard office software capabilities. To achieve this, the economic essence of the effective rate is considered in the work; the functions of standard office software products that allow solving the task of calculating the effective rate with minimal costs are examined; calculation models based on the functions of IRR and XIRR are created and their compliance with the calculation methods prescribed by law is verified; the reliability of calculating the effective interest rate by commercial banks of Ukraine is checked on real examples. The results can be used to verify the real annual rate mentioned by banks.

Keywords: effective rate; real rate; lending; calculation; interest rate.