You've probably heard of excessive interest rates, haven't you?!

Interest is a very important part of loans.

The problem is that, in addition to a loan being necessary for a person or company, it can also be harmful to the borrower if not handled carefully.

Especially when the charges are above the limit.

Abusive interest rates are those that do not comply with the law and are therefore considered illegal.

This is because they exceed the limit of a reasonable interest rate, considering the characteristics of the business and the market cost.

To determine if the charges being levied are excessive, the first step is to know how much interest you are paying per month and per year, as well as having information about the value of the money invested.

The first piece of advice is that if a bank or financial institution charges excessive fees on your checking account or personal loan, you need to protect yourself. This is because these fees can be used to harm the consumer.

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Despite this, there is a way to escape and avoid becoming a victim of abusive interest rates: knowing how to identify them. If you understand how they work, you can protect yourself and avoid being deceived by banks or financial institutions.

What constitutes excessive interest rates?

Charges that do not respect the reasonable average of transactions and cause the bank to profit excessively are considered abusive.

The distinction between abusive interest rates and conventional interest rates is that, although both are charged by the bank as loan fees, the former are not based on the market rate.

Article 4 of the 2019 Legislative Decree (Interest Decree) states that "the charging of interest on debts whose total value is less than one hundred minimum wages is prohibited."

Charging interest rates above the permitted limit is one of the biggest concerns for Brazilians, mainly because it is common in financing and loan contracts.

In general terms, the calculation is based on the loan amount and not on the total cost of the contract. In other words: if you requested a loan from the bank and they charge you 10% of the amount you intend to use to buy a house, for example, you would be paying excessive interest.

This is because this fee represents only a portion of the total cost of the financial transaction and does not include other charges.

To better understand what abusive interest rates are and how to calculate them, it is necessary to understand what the bank spread is.

The bank spread is the percentage that banks and financial institutions charge on the interest for money they lend you. When the bank spread is higher than the Selic rate, you are paying interest above what is permitted.

If you want to calculate whether the charges on your loan are within the limits allowed by the courts, simply do the following calculation: divide the Selic rate by the number of months of grace period on your loan (that is, how much time is left before you have to pay off the loan).

How to calculate excessive interest rates?

Thanks to a change in 2015, it is possible to calculate these above-limit charges directly on the website. Central Bank of BrazilWe just need to know how to do it.

First, we need to know the value of the contract established between the parties and the amount of debt the person incurred. After that, it's just a matter of doing the calculations.

Interest rates considered abusive are those that exceed the legal limit established by SISDEC (Brazilian Consumer Protection System), which is the SELIC rate + 2% per year.

The SELIC rate is the basic interest rate in Brazil, so if you multiply it by 2%, you have a very close estimate of what banks and financial institutions can charge.

The Central Bank has a simulator to facilitate this process.

How to protect yourself?

Nowadays, many people are suffering from interest rates exceeding the permitted limit. Therefore, to avoid becoming a victim of this type of situation, it's important to know how to protect yourself.

Excessive interest rates are common and can be extremely damaging to your finances. However, by learning some basic knowledge about what excessive charges are and how to protect yourself against them, you can avoid many future financial problems.

Before applying for a loan, you should know exactly what you're getting and what you're paying for. Never be afraid to ask the lender to explain any fees, terms, or conditions you don't understand. And never sign a blank form.

Make sure that what you sign is what you verbally agreed to. Do not sign any contract that does not match what the seller presented.

If you notice an excessive interest rate on your loan, you can use the Consumer Protection Code to defend yourself.

Interest charges on credit card bills

You've probably heard that your credit card might charge you excessive interest rates, but do you know exactly what that means? The term 'excessive interest rates' is used when the fees and charges levied by the bank exceed the limits established by law.

Most credit cards have a fixed annual interest rate to cover the difference between the bank's offer and the customer's offer, but some banks also create variable rates based on fees for using the card.

If a financial institution charges differently for the same service depending on the amount of money borrowed, that is also considered an illegal practice.

Credit card interest rates are one of the biggest problems people face and cause the most headaches for cardholders.

They vary depending on the type of plan, but some are certainly excessive. Even so, identifying these charges and understanding how to get rid of them is no easy task.

First of all, it's important to understand that the Central Bank of Brazil's interest rate table is responsible for establishing the rates charged by financial institutions throughout the country.

This body is also responsible for regulating the rates charged by banks, ensuring that they do not exceed the Selic rate.

If you receive a statement with excessive charges, it's important to review your case and check if there was an error in the billing.

If there is no error, you can file a complaint with Procon (Brazilian consumer protection agency) or in court.