Restyling of fees in consumers credit and their optimization

Restyling of fees in consumers credit and their optimization

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Article ID: iaor199942
Country: Netherlands
Volume: 91
Issue: 2
Start Page Number: 330
End Page Number: 337
Publication Date: Jun 1996
Journal: European Journal of Operational Research
Authors: , ,
Abstract:

The structure of fees in a consumers credit contract is considered. It is analysed under the profile of its financial convenience (measured by the net present value (NPV)) and the legal profile, requiring to declare the internal rate of return (IRR) after fees. We characterise the fees structures allowing for both an increase in the NPV and a decrease in the Internal Rate of Return. We provide also the description of optimal fees structures by solving an LP problem. Finally the problem of financing initial expenses is considered.

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