The bank offers its customers to borrow and save money. For this, it provides them with offers of credit and savings that are accompanied by specific safeguards proposed at variable rates.
When banks lend money, it is with interest rates, the amount and duration vary.
The interest rate reflects the cost of money. It is expressed as a percentage:
For the borrower, the price of that money is made available.
For the lender, it is the compensation money he advances to the borrower.
Example: the interest rate may be:
nominal (fixed rate at the signing of the loan, paid by the borrower) or actual (nominal rate adjusted for inflation),
fixed or variable (indexed).
The various bank rates
The bank base rate (BBR)
The bank base rate is the annual interest rate set by the banks. This rate is used to calculate the price of credits they issue.
The money market rate guides the bank base rate. The money market rate is based on supply and demand.
Bank base rates are freely set by the banks, however, they dependent on agreements with the monetary authorities.
This is the bank base rate, which defines in large part the benefit of banks resulting from the allocation of funds
The percentage rate (APR)
The percentage rate is an indicator that allows the borrower:
compare the cost of funding proposed
ensure that this rate is below the rate of wear.
The APR is calculated the same way and on a comparable basis by banks and credit institutions: (calendar year duration / time unit) × rate period
The wear rate
Financial institutions do not have the right to lend money at a rate exceeding a ceiling established by the Bank of France, commonly called wear rate.
This rate is reviewed quarterly and defined in terms of changing rates.
Any conventional loan subscribed to a percentage rate exceeding (when signing) over a third of the average effective rate is considered usurious.