the formula for calculating T.A.E.G. on an annual basis is as follows:
TAEG = ((used+interest+charges)/used)t -1
the amount used is the amount of credit granted to the customer for a given reference period;
the interest is obtained by applying the contractual interest rate to the used, as provided for in the contract;
charges include all expenses, other than interest, incurred during the reference period in connection with the credit line. Charges include, for example, periodic fees and other fixed charges relating to the accounts and relevant to the loan;
for the calculation of the APR, a credit line of EUR 1,500 and a quarterly reference period (t = 12/3) is assumed; alternatively, if the duration of the credit line were known, t would be equal to the ratio between 12 and the reference period expressed in months or fractions of months, or 365 compared to the reference period expressed in days.
The calculation of the APR in the current account information sheet differs according to the assumptions made:
- a use of 1,500 euro
- a nominal annual borrowing rate of 5.25%, and
- expenses related to the disbursement of credit amounting to EUR 50 one-off
- a credit period of 3 months
The interest will therefore be equal to: 1,500 * 5.25% * 3/12 = 19.69 euro.
The charges, on the other hand, will be equal to: (2% * 1,500 + 50) / 4 = 20.00 euros, while the TAEG will be equal to (1,539.69/1,500)12/3 -1 = 11.01%.
is hard to understand?