This guide will walk you through how to apply for a loan. We get into things that need to be considered when applying for a loan. These things include: what are the costs, what types of loans are available, and what factors affect the credit decision. At the end, we cover the most common hazards when applying for a loan.
Before applying for a loan
Bank or finance company?
All banks offer loans to their customers in one way or another. Most banks provide consumer credit without collateral, so you do not need, for example, a mortgage. If you apply for a loan from a bank, it is usually cheaper than earning from a finance company. The application process for banks is also often a bit longer than for financial companies, which can apply for a loan on the same day.
Some lenders use customer-specific interest rates in their pricing – so the interest rate is not the same for all customers, while others pay more on their loan than others. This gives lenders the opportunity to optimize their own profitability and a way to charge more risky customers.
When comparing offers, keep in mind that the loan may not be available at the lowest marketed interest rate.
Current annual interest rate and expenses
Most all loans pay not only interest but also expenses. Typically, the lender will initially charge a start-up fee ranging from $ 50 to $ 300. In addition to this, the lender will charge a monthly account management fee, which is usually € 3-10 / month.
When comparing the cost of a loan, it is worth paying particular attention to the current annual interest rate, which corresponds to the actual cost of the loan. At the current annual interest rate, all expenses have been converted to interest rates, which makes it possible to compare different loans on a scale.
One time loan or Flexibility loan?
Is it appropriate to have a certain amount available at one time and pay off the loan gradually, or is the amount unclear or is the loan often needed? A one-time loan gives you a certain amount to be repaid. Flexicurity provides you with a credit line, from which you can withdraw the amount you need. Once you have paid back the amount you have withdrawn, you can withdraw it again. Flexible loans usually charge a fee for each draw.
The correct loan amount and payment term
The loan should not be taken more than is necessary. Every euro borrowed must be repaid – with interest.
However, it is worth noting that for some lenders, the interest margin is tied to the loan amount. For example, it might be cheaper to borrow $ 4,100 than $ 3,900 if the interest margin on loans over $ 4,000 is lower!
It’s a good idea to play with certainty when choosing a payout period – the monthly installment should be adjusted so that you can handle it without any problems. If there is any excess left, it should reduce the loan capital. Too much monthly installment can easily lead to problems.