Interest calculation method (for each bank)
What it is — interest-rate formation With variable rates, interest rate = variable (reference) component + fixed margin. The margin is usually constant for the whole term; the variable component can move and so change the size of the monthly instalment. Each bank determines this variable component differently — and this is exactly where offers diverge most. Not so much “in quantity” at the moment the loan is signed, but “in quality”, through the reference rate built into the contract. It is critically important whether the reference rate is based on the cost of deposits in Bulgaria or on the 3–6-month EURIBOR.
How banks differ Some banks use a market index (e.g. EURIBOR), others their own reference or interest index built on their own methodology (for example average deposit rates or another defined indicator). The same rate today at two banks can behave very differently when the market changes — depending on the method and on how transparent and verifiable it is. Consult a professional Credit Consultant.
Why it matters to you What is truly fixed is the margin. The future of your instalment depends on how the variable component is determined. A transparent, market-linked and publicly verifiable component is more predictable and fair than an internal bank index whose definition and value involve monetary policies that rarely reach you.
What to watch for
- Check exactly how the variable component is formed and when it is updated.
- Compare methodologies, not just today’s rate.
- Insist that the method is clearly described in your loan agreement. Banks’ methodologies change — always check the current one that will apply to your contract.
In the LendingFree comparison report this field describes the calculation method of each bank, so you compare not only today’s number but how it will behave tomorrow.