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Features of a good loan
When you are comparing loans, pay attention to the interest rate and the terms and conditions, in particular. The annual percentage rate of charge is an indicator that helps you to compare loans to each other.
Be sure to consider at least the following matters:
- Is the nominal interest decent compared to other similar loans?
- Are the credit costs, such as opening fees and invoicing charges, low?
- What is the annual percentage rate of charge on the loan?
- Are the terms and conditions fair? Can you, for example, pay extra instalments or repay the entire credit at any time without any fees?
Compare what matters - pay attention to the actual annual percentage rate of charge on the loan
Remember that the nominal interest of the loan, in other words, the interest rate charged on the loan, is not the whole truth. The nominal interest rate usually consists of the market interest rate (e.g. 12-month Euribor) and a customer-specific margin added to the interest rate. In addition to the nominal interest rate, you should always check the annual percentage rate of charge (APR), which reflects all other costs for the credit as well.
The APR will reveal the total cost of the loan; in addition to the interest, it includes all costs such as the opening fee and monthly account management fee. In other words, the APR takes into account all costs and charges related to the loan. Carefully read the loan terms to find out how the duration of the credit or changes in the payment period, for example, affect the total loan costs.
A reliable bank will have transparent pricing.
Also pay attention to hidden fees.
Check if the loan involves extra costs such as fees for partial drawdowns. Some operators may present the costs as percentages, which makes comparison more difficult. Make sure that you understand all the costs related to your loan to avoid payments that you had not accounted for.
Adjust the monthly payment to your circumstances
The quicker you want to repay your loan, the larger the monthly payments will be. Even if your loan has a low interest rate and low costs, it may be difficult to repay the loan as quickly as you would like to. Make calculations on what kind of a monthly payment you can afford before you take out a loan. Don't forget to take into account that interest rates may rise if your payment period extends.
