Loan with small interest rates
Interest on loans are a necessary evil. Anyone who wants to borrow money knows that the lender sees this as a business. His profit margin is the interest. Of course, you still want to pay as little as possible. You are looking for a loan with small interest rates. In doing so, if you have already researched something, you will have noticed unpleasant things. The corridor in which interest rates on loans move is gigantic. It is not easy to know when interest rates are low or when.
Low Interest Loan: Which Loan Type Do You Need?
The reason for the supposedly large interest corridor is relatively simple: each type of loan has its own interest margin. This can be explained relatively simply by the different risks a bank incurs in the different loan types. For example, real estate financing is one of the cheapest loans in terms of interest rates you can get. Finally, land and house (or apartment) are in exchange for the loan. For this reason, pay for product financing, which often cost no interest at all – the risk is very low by the equivalent value.
It goes without saying that this order is not absolute. You will easily find car loans that are more expensive than other earmarked loans (eg for home renovation). These are average figures.
Loan Interest Rates: Across Corridors in a Loan Type
The information on the different types of credit are not the only ones that differ greatly. Even within the individual loan types, there are interest rate corridors, which is why a bank usually can not even tell you from scratch, how much you have to pay now. Instead, you will hear that “this depends on your credit rating”. The logic is the same as before: the better your credit rating, the lower the risk for the bank that there will be problems repaying the loan. Accordingly, the risk premium on the interest can be reduced and it remains almost only the profit margin.
For comparison: Small interest rates are not everything
If you are actually starting to look for low interest rates, you should use a loan calculator on the internet. The latter equips you with information that otherwise would have to be collected effortlessly in hours. Then make sure in the comparison that low interest rates are very desirable and important, but by no means everything. You should check if there are any hidden fees and charges. Also of relevance is the question of how high the special repayments you are likely to make annually, without having to pay additional penalty interest.