Cost of credit granted by the commercial houses of the Central Department from the perspective of the end customer, year 2017

Abstract

The objective of the work was to determine the cost, in percentage, of the credit regularly delivered by commercial houses in Paraguay, from the perspective of the end customer. With this purpose, in 2017, a quantitative investigation of exploratory scope was carried out. The fieldwork consisted of reviewing the offers of the commercial houses, published in digital form, and by printed means. Subsequently, personal telephone communications were made with the sellers of this commercial house, to obtain the missing data. The main data is the cash price, the list price, and the amount of the installments. The BAILY formula was applied to facilitate the analysis and presentation of the results. To verify the findings of the investigation, the rates were applied in the French amortization system, whose interest rates are established on the balance of the debt and the relevant rate. The average result of the sample is 83% nominal annual rate and 139% effective annual rate.
The nominal rate could be considered as high regarding to the top active rate established by the Central Bank of Paraguay. However, it must be considered that the risks at an extra banking credit assumed would be higher, therefore, it would be necessary to analyze the level of risks to establish rates for each operation.