Why do banks not indicate the full cost of the loan?
Tashkent, Uzbekistan (UzDaily.com) -- The total cost of a loan (CPM) is the interest rate in reliable, annual, and effective terms that calculates borrower payments related to obtaining a consumer loan or loan, the Central Bank of Uzbekistan reports.
To date, all banks indicate the size of the total cost of the loan in consumer loan agreements concluded with borrowers.
The calculation of the total cost of the loan includes the following payments of the borrower:
- on principal and interest;
- in favor of the creditor bank if the borrower’s obligation for such payments follows from the terms of the contract and (or) if the issuance of a loan or a loan is made dependent on such payments;
- in favor of third parties, if the borrower’s obligation to pay such payments follows from the terms of the contract, including payments:
- in favor of the insurance company, if the beneficiary under the insurance contract in the event of an insured event is a bank;
- in favor of insurance organizations when insuring the subject of a pledge under a pledge agreement, which secures the obligations of the client under the agreement and is in use of the pledgor;
- to the guarantor (surety) for receiving a guarantee (surety), as well as to the appraiser for evaluating the property being pledged;
- in favor of organizations (intermediaries) that provide services to the bank in attracting customers, checking documents provided by customers to obtain a loan or a loan, accepting payments and transfers from bank customers to repay a loan or loan.
Banks are required to calculate the total cost of the loan:
- at the conclusion of the contract;
- to potential borrowers at the time of clarification to them about the conditions for obtaining a loan (loan).
Currently, World Bank experts have given recommendations to the Central Bank on the introduction in all credit institutions of a unified standard for calculating the full cost of a loan.
Based on the foregoing, today the Central Bank specialists are working on the introduction in all credit institutions of a single standard for calculating the full cost of a loan. The implementation of this standard is planned for the second half of this year.