3 tips on what to look out for when taking out a loan
In times of low interest rates, loans are comparatively cheap. Nevertheless, you should be on your guard and not just pay attention to the interest rate. Three tips show what you should pay particular attention to when taking out a loan.
Thanks to low interest rates, it is becoming much cheaper for private households in particular to finance certain purchases. For example, many car dealers offer "0 percent financing," dealers of kitchen appliances offer payment in installments free of charge, and even vacations can now be financed.
However, financing should not always necessarily be concluded where the product is purchased. This is because the dealer must compensate the bank accordingly for the loss of interest and has less scope for a discount when selling a car, for example. Therefore, the use of a normal consumer loan should also always be evaluated and, of course, cash payment should also be considered if the appropriate liquidity is available.
Three tips for successful borrowing
The following three tips should help you when taking out a loan, so that you do not experience a nasty surprise after taking out a loan.
1.Leave yourself room for maneuver for the monthly installment.
Who would like to have something, tends to calculate the associated financing beautifully. When calculating the maximum monthly installment, only minimal costs for food and leisure activities are taken into account, since people are of course willing to do without these luxuries temporarily for a new car or a new computer. But as soon as the joy of the newly purchased item has passed, many borrowers are annoyed by their high installment, as they still have to save enormously. If the new car is then financed for 36 or even 48 months, the dream car quickly becomes a curse. That is why financial planning should not be based on optimal values, but on real values. So if you want to check whether you can actually afford a high installment, you should keep a budget book for at least one month and check whether the planned budgets are actually realistic. And savings, such as on car insurance, can also ensure that more money is available each month to pay the installment.
2.Calculate the absolute costs
When comparing different loans and the cash option, consumers should not be blinded by sample calculations provided by banks or retailers. These are usually designed in such a way that there is hardly any other sensible option for the customer than to take out financing at the appropriate point. But it is often the case, particularly in the retail sector, that consumers are "talked into" so-called payment protection insurance or similar insurance products. Often this is done with the help of consumer fear. Unfortunately, when a credit agreement is concluded in-store, consumers are far too seldom given objective advice, but are instead pushed by all means to take out additional insurance that is in most cases unnecessary or too expensive. Therefore, customers should rather look for a lender via the Internet. Who uses a loan comparison from an independent site can be sure that he gets only the best offers and no unnecessary additional products imposed.
3.check a special repayment
An important component in many loans is the so-called special repayment. It gives borrowers monthly, annually or in another rhythm to be determined in advance the opportunity to repay sums exceeding the regular installments. This can shorten the term of the loan and significantly reduce the interest burden. With current contracts, this option is often available, since the banks miss out on less profit than a few years ago, especially with the low interest rates, and it is a good advertising tool. However, if you still have an older loan agreement, for example from real estate financing, you should check your contract again very carefully for such a clause. The older the contract, the higher the interest rates tend to be. In cases where the capital for an unscheduled repayment is not available, it may even make sense to take out another loan to make the unscheduled repayment. In this way, the borrower can benefit from the current low interest rates and pay off the old loan with the higher costs more quickly.