If this year you are proposing to contract a personal or real estate loan, you will have to weigh things up well. It is true that the bank will give you a sum that you can fully reimburse with the income you have but it is good to think of yourself as a lender. Here are the best tips for borrowing money!
Find out the total amount of credit
Before contracting a loan, carefully study the interest rate and calculate the total amount you will have to repay. Careful! In some situations, huge differences can occur, and when you return to a bank in the form of interest, more than half of the amount borrowed, it means that the credit is not at all profitable.
Credit period, proportionate to the amount borrowed
The longer the credit period, the higher you will get back. Many people, however, prefer to take a longer-term loan in order to benefit from lower rates. But at a closer look, you will realize that the differences between the rates of the two credit options (short or long term) are not so high that long-term credit is warranted. In addition, you must always be guaranteed that you will be able to pay off the credit no matter what happens, and a shorter debt will mean you will quickly get out of debt and save your money on interest.
Need more tips for borrowing money? Keep reading!
Pay attention to fees and commissions
Loan bids sometimes have hidden fees or charges, which the customer finds out only when they start paying rates. A reliable, trusted bank will mention your annual effective interest rate, the total cost of the credit, but also the commission it charges, the credit insurance or the related fees, and a graph that includes the monthly rates throughout the repayment period . In this way, you will know exactly how much you will have to pay each month.
What are the conditions for early repayment?
Early repayment means reducing the lending period after you have taken the loan. This method of returning money is extremely useful if you are able to pay higher rates. The interest will fall, and you will return less money to the bank than the amount originally set. Some institutions charge commissions for early repayment, but their value has been capped. Thus, these fees should not be higher than 1% of the amount paid in advance in the case of a final maturity of more than one year, or 0.5% for loans over a period of less than one year.
What is the maximum rate that you allow
Banks calculate your maximum credit amount depending on your earnings, but also on your monthly expenses. But you will have to consider other aspects as well. For example, a person who pays a foreign currency loan and makes a long-term loan will have to think about the possible devaluations of the his currency against that currency, usually the euro and lesser dollars. Think about your monthly spending, but also about the lifestyle you’re going. The maximum indebtedness rate is 75% of your earnings, but you’d better be doing one month’s test. Try to live with the money you have left after paying your rate. See, are you doing?
In conclusion, we all know borrowing money is not a pleasant thing to do but, in some period of our lives, it is the only thing we can do. Thus, following some elementary tips for borrowing money is mandatory.