How to choose a loan?
According to the Credit Checker report, over 15 million Poles took a cash loan or loan last year. A loan can be a good solution in the event of large unplanned expenses (e.g. expensive car repairs).
This is the easiest way to get extra money and – most importantly – it doesn’t have to be expensive. Just take a good look at all the factors affecting its total cost and carefully analyze the offer. Where to start?
Borrow as much as you really need
Since you have decided to make a financial commitment, you need additional cash, e.g. for refurbishing an apartment, or just want to make your dream come true. Determine your needs and think about how much money you need. You will have to surrender each dollar borrowed from the bank with a surplus.
As the loan amount increases, the monthly installment increases, and many borrowers have a problem paying it off. This is because the amount they have pledged to give away regularly simply outweighs them.
How to avoid it
First of all, analyze how much your monthly installment can be up to so that you can easily cover current fees and bills, pay for food, meet the material needs of the family, have cash for pleasures, education and everything else that belongs to your regular expenses.
Analyze all loan costs
The cost of a cash loan consists not only of interest. Although it is the banks that information about it in advertisements. The actual cost of the loan is determined by the APRC, i.e. the actual annual interest rate. The lower its value, the less you will pay for the loan. APRC includes all additional fees, such as commission, preparation fees, costs of additional banking products or insurance policies. Independent calculation of the APRC is difficult, even impossible for the average Kowalski. Its height, in addition, depends on many factors. That is why it is always worth asking a bank representative to do it for you.
For example, by borrowing USD 66,700 for 72 months at Citi Handlowy bank, the customer will be required to pay back USD 87,576.79. The APRC is 9.62 percent in this case . , and total costs include interest (USD 12,380.79), commission (USD 5,336) and additional fees (USD 2,160).
Very high APRCs usually have fast loans for a small amount and a short repayment period. For example, taking out a 12-month loan, you have to reckon with the fact that the APR can be as high as 506.29 percent. ! This means that you will have to give back more than five times more than you borrowed.
Choose the installment system that’s right for you
The loan installment consists of two parts – interest and principal. The interesting part, as the name implies, consists of the interest on the borrowed amount. The capital part is a part of the amount that we borrowed from the bank. When choosing a loan, you can choose the repayment system that suits you best.
You can choose equal and decreasing installments. How are they different? By choosing decreasing installments, you will pay off an identical portion of capital every month and interest will decrease every month, calculated from the decreasing capital. As for equal installments, they have the same amount each month of repayment. Along with the repayment of the debt, the interesting part decreases and the capital part increases.
Take additional products under the microscope
Banks often require the customer to purchase other banking products along with the loan. There is nothing wrong with it if it is, for example, a free bank account. Before making the final decision, check the table of fees and commissions and take a closer look at the proposed ROR (mainly look at the fees for running it and the card, and if you want to use it actively, also for withdrawals from ATMs and transfers). Consider also credit insurance. In exchange for using such a product, you can often count on a lower interest rate or commission.