Borrowing is not difficult these days. Whether as a simple online loan or classically via a bank, the market offers a variety of offers. With a loan often long-term interest and repayment obligations arise. Therefore, you should consider different loan offers carefully. Here are some tips on what to look for when choosing the right loan.
Compare credit costs
The main cost component of a loan is the interest. The interest rate on the loan amount used is called the borrowing rate. If the interest is fixed over a certain period of time or the entire term, it is called the borrowing rate, otherwise the borrowing rate is variable. There are also other important cost components, such as processing fees or loan fees. In order to make different credit offers comparable, the legislator has made it obligatory for lenders to quote the so-called APR for loan offers. In addition to interest, it takes into account additional cost components of a loan and can be used as a benchmark. In the case of different offers, you should pay particular attention to the annual interest rate in addition to the debit interest. But the effective interest rate does not include all credit costs. Provision interest, valuation costs for collateral or costs of a voluntary residual debt insurance, for example, are not included. They must be considered additionally.
Pay attention to contractual conditions
The terms of a loan include not only the costs, but also the monthly installment and the term are important. With a fixed loan amount, the shorter the term, the higher the monthly installment and vice versa. You can influence your personal rate with the choice of the term. The installment is especially important if you only have relatively little financial leeway. In addition, there are other terms that you should include in a credit decision. Many lenders allow premature repayments – even without expensive prepayment penalty. Regulations on repayment obligations or rate adjustments in the event of a change in economic conditions may also be important.
To test the personal efficiency
By borrowing it is easy to realize short-term consumer needs or larger purchases. If you are thinking of borrowing, you should always check beforehand if you can afford the related interest and principal payments. This is where a household bill helps you determine your monthly payment options for installment payments.