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What does this loan really cost?

Copy the numbers from the offer or the contract. We work out what you really pay a year, the same way Banxico calculates the CAT. The example below is from Banxico's own guide: a loan advertised at 42% a year.

Opening fee (comisión por apertura) or any charge taken before you get the money.
The amount you'd actually pay each time.
Insurance or any charge added to every payment that isn't already in it.
Optional, to compare. Leave it empty if there isn't one.

The working

  1. What you actually get10,000.00 − 200.009,800.00
  2. What you pay back13 × 850.0011,050.00
  3. What the loan costs you11,050.00 − 9,800.001,250.00For every 100 pesos you receive, you pay back 112.76
  4. What it really costs a year
    Advertised rate42.0%
    What it really costs a year147.8%
    The blind spot: 105.8 points the advertised rate leaves out

If your payments include VAT (IVA), so does this result. The official CAT leaves VAT out, so the CAT on a contract can be lower than what you really pay.

Method: Banxico's CAT formula. This is an estimate for comparing offers, not a quote. Banxico CAT

How the calculation works

Banxico defines the CAT (Costo Anual Total) as a standard annual percentage that, for information and comparison, includes all of a loan's costs and charges. It is the rate at which everything you receive equals, in today's money, everything you pay back. This calculator solves the same equation, the way Banxico does, by narrowing down on the rate step by step.

We check it against Banxico's own worked examples, including the one loaded above, and it gives the same answers.

  • Fees taken at the start lower what you actually receive, so they raise the real cost.
  • Extras on each payment, like insurance you're required to take, raise what you pay back.
  • VAT (IVA). Since 17 November 2009 the official CAT leaves VAT out. If the payments you type in include VAT, the result includes it too, so it can be higher than the CAT printed on a contract.

Sources: Banxico, CAT calculator and definition ·Banxico, “Crédito y Costo Anual Total”