How do I determine the interest that I pay on my loan?

Are you planning to take out a loan? Then it is wise to compare the interest rates of the various providers. Where do you pay the most competitive interest, or where are the total costs of the credit the lowest? Do you also know how the interest you pay is built up, where a higher or lower interest comes from? We list the various elements so that you can take them into account when comparing the different banks and lenders.

 

Loan amount

Loan amount

First of all it is important to take a good look at the loan amount involved, since the interest often depends on it. In many of the cases, the interest rate will be lower the moment you decide to borrow more, since, for example, the administrative burden will make up a smaller part of the total. Is there a collateral for a large amount that you want to borrow, such as for a home loan? The interest rate will then be much lower, although this is mainly due to the risk profile.

 

Risk profile

Risk profile

The risk profile stands for the risk that a bank or other lender runs by lending you a certain amount. After all, the lender gives you money, with the obligation to repay it after a few months or years. Have you been in arrears with regard to a loan in the past, or do you already have other loans that are difficult to repay? In that case there is a good chance that a bank will charge you a higher interest rate. So always provide as much certainty as possible about the fact that you will pay back the loan in order to keep the loan as cheap as possible.

 

Market interest

Market interest

Finally, the interest that you pay for a loan always depends on the market interest rate at that time. Now, for example, interest rates are very low, which means that loans are also relatively cheap. The moment the economy starts doing better again, interest rates will rise. Banks must then pay more to be able to borrow external money, which means that the interest for you will also be higher. Unfortunately, you cannot do much about this element of the interest that you pay on a loan, as everyone who wishes to take out a loan is affected.

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