The interest payable represents the price of a loan, so that every borrower wants to pay the lowest possible interest on their loan. The desire for a long loan term with correspondingly low rates is not always compatible with the pursuit of low interest rates. The effective annual interest rate is decisive for the credit costs, while the nominal interest rate is used for the recalculation if the loan agreement is not always possible to change. While the effective annual interest rate is the percentage loan cost, the difference between the amount paid out and the total repayment within the loan term shows the total cost of the loan.
What are the requirements for a low borrowing rate?
In order for credit customers to get a loan with low interest rates, they compare the prices of different providers. In principle, it can be observed that loans applied for online are cheaper than in a bank branch or credit agreements concluded by telephone. Furthermore, instant loans are regularly more expensive than loans with a normal processing time, so that borrowers with sufficient time do not apply for a loan with immediate disbursement.
The reason for the higher interest rate on the instant loans is that borrowers are willing to pay higher debit interest to compensate for a quick cash payment. In addition, the only partially possible examination of the credit documents increases the risk of a loan default, so that the lender has to raise the interest as a risk compensation. A loan without proof of salary is never a loan with low interest rates because the lender cannot afford it because of the high risk. The same effect also occurs with loans without Credit bureau, so borrowers with a good credit rating should not apply for them.
Loans with particularly low interest rates
Banks grant loans with low interest rates for purchases such as real estate or a vehicle, since the object financed in each case serves as collateral for the loan. Securing a loan that is not directly related to the property via a land charge is also possible after the original property loan has been paid off and, thanks to the excellent security, leads to low interest rates. For other purchases such as furniture or bicycles, a loan with low interest rates can in many cases be taken out via the retailer or agreed directly with the retailer in the form of an installment payment. Few policyholders think that if they need to borrow, they can borrow from an existing life insurance or a pension scheme that they have.
In this case, you actually pay interest on your own money, but keep your insurance cover and pay significantly lower interest than at the bank. Employees inquire with their boss or the works council whether there is a company agreement regarding an employee loan. The employer grants a loan significantly cheaper than a bank and offsets the due loan installments directly against the following salary payments. The low-interest loan from the employer only has the disadvantage that the remaining amount is due immediately if you leave the employment relationship.