When you borrow, the cost you incur is beyond the interest rate. Borrowers should therefore know about the “Total Cost of Credit” or TCC associated with the loan or credit facility.
The TCC will include the bank interest rate based on a reference rate plus a premium that covers the Cost of Funds component not covered by the reference rate, the operational costs, risk factor and profit margin. TCC also includes other bank fees and charges directly associated with the loan. Third Party Costs directly associated with the loan are also covered in the TCC, these include legal fees, insurance, valuation, and government levies.
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