Interest Rate is Not Everything – What to Pay Attention to When Choosing the Optimal Cash Loan?
Banks know very well how to pay attention to their offers. First of all, they create amazing advertising around one indicator to distract attention from other equally important costs. In the case of cash loans, there is interest. Accurate interest, when browsing individual proposals from the banks, interest us the most. However, is such a theory right?
Nominal interest rate
It should be known that the interest rate, which is the basic element of additional fees on the loan taken, is very much dependent on the interest rates of the National Bank of Poland. This means that it can not be higher than four times those rates. At present, we are dealing with some of the lowest interest rates that were added to cash loans. However, it is not the banks that decide about their upper limit, but this limit is imposed on the institutions.
Banks can only lower the interest rate, which they often use in their advertising campaigns. Indeed, the interest rate of 2.5% looks far more attractive than the 10% interest rate per annum. However, it should be taken into account that these are still not all the criteria affecting the final sum of our commitment. And this seemingly better loan offer, at the end may turn out to be more expensive than a loan with a higher interest rate.
The commission is added for granting a cash loan. This ratio is expressed as a percentage. Therefore, at the same time you can expect that it will be easier for us to calculate it. However, it should be remembered that it is not calculated on a yearly basis, but on the value of the entire capital that we borrow from the bank. The commission here has a more flexible scope. Namely, banks can successfully lend with commission ranging from 0% to even 20%. Sometimes the commission is not expressed as a percentage, but in a specific sum. It should be noted that this is a moving indicator, so it does not have to be the same for a person borrowing PLN 2,000, and for a person lending PLN 100,000. Banking outlets very often induce customers to use their additional banking products, which is a condition for lowering commissions. However, it is worth calculating exactly whether using this option will really pay off.
It is a fee charged for preparing all formalities related to granting a cash loan. Fortunately for potential Borrowers, banks are increasingly giving up this fee. It is much more often used in other banking products, such as housing loans or mortgages. If it is already calculated, then the most common is the specific sum.
This is an extremely rare payment. Actually, you can hear more about this charge in the non-banking sector than in the banking sector. However, it is also worth bearing in mind that some banks may treat it as hidden costs, which are not visible directly in advertising materials, but you have to find information about it in many different documents, such as a contract or regulations.
It turns out that banks in the case of cash loans are less and less focused on obliging their clients to buy insurance. It turns out that this is an additional cost, which is not willingly borne by many people. Although we do not pay “for nothing” here, but for protection in the event of inability to pay off your debt for various reasons. Sometimes it may happen that when you pay off your loan, you lose our only source of income, or else you get sick, which will make our income fall very much. The most important thing is therefore to think carefully about whether the insurance is definitely an unnecessary cost, or perhaps a good security in case of random events. An insurance package can actually generate additional costs if you take out a small loan and also a short period of time. However, it turns out to be a helpful tool when the speech is definitely larger.
Account maintenance costs
Some bank branches provide cash loans on promotional terms, but in return expect that the customer will create a special bank account in a new facility for him. It is worth considering this step, especially if you are already the owner of one account. Because the inactive account will generate additional costs for us, which for us are only an additional obligation that we would like to avoid. Then the promotional offer may cease to be so attractive when the monthly fees for the account as well as the payment card start to be claimed.
Now we are perfectly aware of what factors we should actually pay attention to. It may turn out that after these few tips, we will start to see cash loans in a completely different way, and how we can predict their total cost.