Keep This in Mind When Taking Out a Loan
Sometimes unforeseen events occur that mean you may need to borrow money. Or you have plans to expand, renovate or buy a car and need help financing the whole project or parts of it. Regardless of what your loan is about, it’s good to think it through carefully beforehand – so that you borrow smart, simply put.
Borrowing money – costs money
The first question you should ask yourself is whether you really need to take out a loan. Borrowing money costs money (interest), so only borrow when you really need it and primarily use a buffer or saved money. But sometimes the savings budget isn’t quite enough, and then a private loan can help finance all or part of the expense.
Compare different banks and lenders
If you have decided to borrow money, you should always compare different banks and lenders to get the best offer. There are several parts in a loan that can differ and affect your monthly cost. An example of that is interest. It can differ greatly between different banks, as banks weigh different things. One person can get a lower interest rate with one bank, while another person gets a longer interest rate with another bank.
Keep track of what affects your interest rate
The interest rate is a big and important part when you borrow money. The fact that it can vary so much between different banks is due to several different factors. Below you will find three things that you can influence yourself to lower your monthly cost:
Don’t borrow more than necessary and pay back as quickly as your finances allow
Compare different banks and their loan terms
Take a credit report on yourself. This way you get a good picture of your credit score and what you can do to improve it. The rating shows how healthy your personal finances and ability to pay are, which affects the interest rate you receive.
Look at the nominal interest rate and the effective interest rate
In order to get a fair interest rate picture when you compare different loan offers, it is important not to confuse the different interest rates. but be sure to compare the nominal interest rate with nominal interest rate, and the effective interest rate with other effective interest rates. Nominal interest rate is the interest rate without other fees included, while the effective interest rate includes all costs with the loan, such as avi fee and arrangement fee – which actually affect the total cost of your loan.
Increase the chances of good loan terms – add a co-applicant
Are there more of you who will use the borrowed money? By applying together with a credit-worthy co-applicant, you have a greater chance of getting your loan application approved. It also increases the chance of good loan terms with a lower interest rate, because the loan is seen as safer when it is divided between two people. Keep in mind that the co-applicant also needs to have a good credit rating without payment notes for it to have a positive effect.
Collect your old loans and credits
Cancel existing credits you don’t use before applying for a new loan. And if you have previous loans, credits or installment purchases that you still haven’t paid back, you can try to factor these into your new loan – by combining loans and credits. In this way, you clean up your finances and increase your chances of even better loan terms in the future. However, not all loans are suitable for consolidation. Here it is important to look at both the interest rate and the total cost of the loans over time and not stare blindly at your monthly cost.