What impact do credit costs and interest spreads have on you?
Credit costs and interest rate spreads are parameters that are of great importance when comparing the various loan offers, but what does this really mean to you as a borrower? This, along with some other important factors, such as the APR value of the loan, in this article we will try to give you some more information about. That way, you will be better equipped to find the cheapest and best loan.
The APR value of a loan gives an indication of what the total cost of the loan will be, based on an annual percentage of how much you actually have to pay in interest and fees. Basically, we can say that the lender that offers the lowest APR value on the loan is the lender that can offer you the most favorable loan.
But this alone will not give you the overall picture of what the loan will actually cost. Therefore, it is also equally important to look at what credit costs and what interest rate spread you will be dealing with, and include this in your overall assessment when choosing a lender.
What the loan will cost you in total in NOK and penny is included in the credit costs. As is the case with the APR value described above, this gives an indication of which loan company can offer the cheapest and best loan to you. The difference is that credit costs provide a more concrete amount, while the APR value is only expressed as a percentage.
Some prefer to use the cost of credit in kroner and penny to find the cheapest loan. This is because it gives a clearer picture when you see the amount stated in a monetary sum and not a percentage. Others, on the other hand, prefer to use the APR value to compare loans with as it is easy to compare loans based on the difference in terms of percentage.
This is something that you have to calculate yourself, but neither banks nor loan companies are obliged to disclose credit costs in any other way than the APR value of the loan.
You can easily find the actual credit cost including all the fees by multiplying the amount you have to pay in monthly installments by the number of months you have for the term of your loan. Thus, you have a very clear and clear picture of what the actual cost of your loan will be including all fees.
What is important here, whether you prefer to calculate the cost of the loan in kroner and a cent or a percentage, is that you relate to the reality. What you should do is create a budget so that you see clearly whether you will be able to service your loan.
A low interest rate does not guarantee a cheap loan with low fees
What all loans have in common is that loans come with monthly installments, fees and an interest rate. If you have registered a collateral in the consumer loan , there may also be talk of various fees that you have to pay.
However, while you can deduct interest on the tax, this does not apply to fees and charges. So, the irony here is that even though there is a low interest rate and high fees on your loan, it may cost you more than if you have a loan with lower fees and a slightly higher interest rate. For this reason, it is recommended to use the APR value to compare loans to find the best option for you.
Generally, both banks and lenders on the Internet specify a so-called interest rate spread on loans. It is very important that you keep an eye on the interest rate spread, as it indicates how high the actual expenses you will get with the loan.
The interest rate spread ensures that the lender has the opportunity to put together and tailor the best solution for you as a borrower. How good a personal finance you have helps determine how much interest you will get on the loan. This also indicates whether the lender has the opportunity to lend money to you even though you may have slightly weaker personal finance, and instead adjust your interest rate somewhat to compensate for the weak private finances.
What your exact interest rate and loan terms will be, you will only see when the lender has completed your loan application. For that reason, it is difficult to say exactly what this will mean until you have received the offer. There is usually a big difference between the lower and upper limits of the yield spread. Therefore, it is always advisable to submit more than just one loan application to various loan companies that you find interesting. Then you compare the offers and choose the best one for you.