Without a doubt, one of the most complex issues that we can deal with is financial, and that is when we start talk about interest rates, payment terms, principal, interest, compound or simple interest, capitalization time, and other terms; It is not surprising that it is quite difficult for us to understand how money is going to behave during the term of a loan, as well as the amounts that we will pay since each of them corresponds.
To make this process much easier the Bank of Spain has developed a simulator with which we can give ourselves a clearer idea about how a certain process will behave, be it a loan, Bank of Spain simulator, mortgage, among other available procedures. But it is true that as a simulator it may not be completely reliable, but if it gives us a better idea about the behavior that money will have, let's see how to make optimal use of this simulator.
The first thing we have to clarify is that it is a simulator; by definition a simulator is a system whose purpose is to try to reproduce a system, being able to reproduce the events that can occur in real life. In the case of the bank of Spain simulator, is designed to allow us to see how interest rates will behave, and most importantly, which is to see how this will affect our pocket by affecting the total to pay and the payments per period.
In this case, the simulator of Spain It serves us mainly for two issues, the first is a bank deposit simulator; the second simulator is for loans. Both are designed so that as users we can make the best decision about the movements we make. But let's take a closer look at each of these two simulators and what decisions they can help us make.
Bank deposits
As to first simulator, which is that of bank deposits; it is a simulator that helps us analyze the behavior of our capital; that is to say, it allows us to calculate the amount to which the bank interest will be equivalent, making reference to the gross interest. This will allow us to make the decision as to whether it is good idea to keep our money "invested" in our bank accountIn the event that the amount of interest that matters does not convince us, we may make considerations about the possibility of having an investment plan in which we get more returns for our money.
Clarifying a point, it is important to consider that the same bank can give us other options to invest. Keeping our money in the bank, and receiving gross interest is a safe investment, that is, there will never be the possibility of losing our money, but there will always be profits. On the other hand, the different types of investments that banks can offer us have two points that we must clarify, the risk and the profit rate. Both numbers will allow us to make a better decision according to our needs and tastes.
TAE
Another of the data that this simulator will allow us to analyze is the APR, or equivalent annual rate. This rate serves as a reference to identify the annual performance or cost of a financial product, in this case our bank account. The most interesting thing about this rate is that it does not consider the total term that our money will be invested in said account. Due to this it is possible that we will see the financial result at the end of the year.
To give us a better idea of what it implies the APRIt must be clarified that the simulator is based on the nominal interest rate, also applying the expenses or costs that the general account also takes into account the commissions that must be covered; other information that it makes use of are the payments and income made to the instrument. Given all this information we can conclude that the APR It will give us an idea of the amount of money that we will obtain from the bank for our money in a total way, since both income and money outflows have been considered. So we can get an idea of the amount of gross money that will be handled in our account during a year.
One of the advantages of APR, is that it compares all the interest rates of multiple operations that can even have completely different compounding periods. Therefore, if our bank account is complemented with other investment instruments, we will be able to get an idea of the behavior of our account in a general way, without the need to be analyzing the calculations of each of the various financial operations.
Information that feeds the simulator
As we have already analyzed this simulator, it is quite practical and has many advantages for the analysis of the behavior of our bank account, but now we are going to analyze what information we must enter in order to be able to get more exact results from the simulator.
The first thing we have to enter is the type of interest that we want the simulator to analyze; This data is important because based on this information, the simulator will make the various calculations that bring it closer to a much more exact result, so that the final information is reliable.
The second thing we must be clear about in order to feed the simulator the right way They are the terms that we want and also the periodicity of payment; All this information is important that we have it available before using this simulator, because this way the results will be more approximate.
A practical advice is that of the information that the simulator requires, we have in any of the fields more than one option; This will help us to analyze the different scenarios from which we can choose the best one or the one that best suits our needs.
Loan simulator
The loan simulator It is a system that allows us to get an idea of the behavior of the installments that we will have to pay in order to be able to cover the loan and the interests. This simulator is quite useful because it will give us an idea of how our money will behave in the long term, allowing us to observe the total that we will have to pay as part of the taxes and to foresee if there is a possible change in the fees that we will have to cover.
When this simulator gives us the results, it is important that we analyze if we will have the capacity to cover the expenses generated by the loan; so that we do not get into debt with amounts that we will not be able to cover. Another point that we have to make clear is that we must analyze the cost and benefit of said loan, in other words, we must ask ourselves: Is it worth getting into debt and paying interest in order to obtain the loan?
Although this simulator will give us a result, the final decision is made by the user, so we will analyze a little more in depth the information that the simulator produces and how the user should interpret and analyze it.
This simulator will give us the initial fee that we will have to pay as a result of a loan, it is calculated given a interest rate and term. So in order to have a much more accurate result, it is important that we have very clear information that will feed the simulator.
Another advantages of this simulator is that it has the possibility of considering in its calculations if there is any variation in the conditions of the loan; to also obtain as a final result the amortization tables. In this way, the final amount to be paid will be much clearer and how it is divided into the time periods that have been agreed in the loan.
The purpose of this information is to be able to make better decisions, for them it is necessary that we consider the first installment that the simulator will throw us; asking us questions like can I afford it? Won't it interfere with some other debt? If an unforeseen event arises, do I have the ability to pay the fee and the unforeseen event? Without a doubt, asking ourselves these questions will give us a clearer idea about whether or not we should agree to get said loan.
Another point that we have to analyze are the amortization tables, which include the periodic payments that we will make to the bank. With this information at hand, we must ask ourselves, should we have the monthly capacity to cover the payments? Is there any other matter where we have the money committed? Reflecting on this matter will give us a clearer idea about which is the best option.
Conclusion
Clearly the simulators They are of great help to be able to make better financial decisions, and the Bank of Spain simulator not only gives us the necessary information to carry out our analysis, but it is also quite friendly, since it is possible that we access these simulators from a mobile device regardless of whether it is iOS, or an Android mobile. All the information and tools are at our fingertips today, now it is a matter of using them and knowing how to use them to our advantage.