Almost every project that consumers plan can now be financed with a loan. There are an infinite number of loan offers and every bank advertises selling cheap, one-off loans. But it is not quite that simple, the credit offers of the banks differ significantly in some cases. Those who really prefer cheap loans should do a free credit comparison beforehand in order to really find the provider who not only advertises with cheap loans, but actually also provides cheap loans.
The market determines the amount of interest
The extent to which cheap loans are really cheap is determined by the market. When market interest rates are very low, savers get little interest on their savings and borrowers have the advantage of having to pay relatively low interest rates when taking out a loan. In other words, there are cheap loans in low interest rates, so it is more worthwhile to take out a loan because the borrowing costs are lower. Of course, cheap loans are also offered in periods of high interest rates, but then at a different level.
The question of whether cheap loans are really cheap depends largely on the conditions on the financial market. Loans that cost 9.90 percent interest in high-interest phases can be cheap – at this time – in a low-interest phase, 9.90 percent are far too expensive.
Gain an overview with a loan comparison
In order to find cheap loans with as little effort as possible, there is the option of making a free loan comparison on the Internet. The comparison portals have set themselves the task of presenting their users with the best providers of cheap installment loans on a daily basis. The banks are listed in a table, the top places are the banks that offer the cheapest loans.
Now you could assume that it would be very easy, now the loan application only has to be made to the bank that takes first place. Unfortunately it is not that simple and why you will find out now.
In first place can be a bank that advertises with very low interest rates depending on the credit rating, but only offers loans from a loan amount of 3,000 USD. If you only want to take out a small loan of over 2,000 USD, this offer is out of the question.
There are now comparison portals on which loan seekers can enter in advance into a loan calculator how high the loan they want to take out and the term of the contract should be. If the loan calculator knows these requirements, it will only make a loan comparison between providers who meet the premises set. This is a qualified loan comparison, which actually gives the loan seeker a good overview of all banks from which a loan of the desired amount can be applied for at the desired term.
Cheap loans with interest rates dependent on creditworthiness
Banks that advertise with interest rates dependent on creditworthiness have the advantage that it is possible for them to quickly top the free loan comparison with the low interest rates. But that doesn’t mean that it will be cheap loans for customers. Unfortunately, credit-related interest rates have the disadvantage that they change from borrower to borrower. In the end, the personal creditworthiness of the individual determines the amount of the interest. In other words, the police officer will get his 10,000 USD loan on better terms than the bus driver.
The professional group influences the creditworthiness, but the age, gender, marital status and place of residence of the loan applicant also play a role in the assessment of the creditworthiness. However, the credit rating system is so complicated that ordinary consumers will never understand what’s going on. You don’t have to, but you should know that the chances of getting a loan with interest rates dependent on creditworthiness as cheaply as it is advertised are only minimal or maybe even hopeless. Only very few borrowers have really cheap loans with interest rates dependent on creditworthiness.
The alternative is cheap loans with fixed interest rates
If you want to save the effort with the personal offers, you should be interested in cheap loans with fixed interest rates. These are loan offers where the interest rate only depends on the loan amount and the term. Of course, loan applicants must be creditworthy to get cheap loans with non-credit interest, but the interest rate is the same for the police officer and the construction worker. The credit default risk is distributed evenly across all borrowers. At first glance, these loan offers do not look like cheap loans, which is why they are lower in the loan comparison, but they are often cheaper than loans with interest rates dependent on creditworthiness.
Do not make cheap loans more expensive through residual debt insurance
Cheap loans can be really expensive if you have additional debt insurance in addition to the loan. The residual debt insurance is a real cost driver. Here the insurance premium is apportioned to the monthly installments, but the premium is not reflected in the APR.