If you are interested in borrowing money, there are some things that are good to know about interest rates. In this text we will take a closer look at what interest rates are and how you can find a loan with a low interest rate.
What is interest?
When you take out a loan, you enter into an agreement with the bank or lender. You get access to a sum of money and at the same time you are obliged to pay a certain interest rate. The interest rate is a fee that performs a percentage of the loan amount. In addition to interest, there may also be other fees, such as invoice fees, avi fees or setup fees. The setup fee is a fee that the bank charges for the administrative costs it entails for the bank to start up a new cheap loan.
Some common types of interest rates are:
- Fixed interest rate of 1 year
- Fixed interest rate of 3 years
- Fixed interest rate of 5 years
- Variable interest rate
If you fix your interest rate for a certain number of years, you will know exactly how much your loan will cost you during that period. This is a big advantage if you have a stressed situation and do not want to face any unexpected costs. In addition, if you can get a good offer at a low interest rate, it may be a good idea to fix the interest rate.
Variable interest rate
Variable interest rates mean that the interest rate can be changed (and most likely will do) from one 3-month period to another. Historically, choosing variable interest rates has been most advantageous, compared to choosing to fix interest rates. However, if you are not prepared for your loan to cost you a lot from month to month, you should still not choose variable interest rates. If it is a small loan and you have a stable financial situation, you can advantageously choose variable interest rates, which means that there is hardly any major risk and you also have the opportunity to save some money compared to if you had chosen to fix the interest rate.
Fixed interest rate
Generally speaking, the interest rate will usually be slightly higher the longer the period you choose to bind it. Of course, the bank needs to have certain margins when it comes to a long-term interest rate. But since it means a security for you to know what your loan will cost you for a long time to come, it may be worth it even though the interest rate is slightly higher than if you had chosen to bind it for a shorter period of time or even had chosen variable interest rates.
For larger loans (such as mortgages), it is often possible to divide the loan amount into different parts. You can then choose, for example, to fix the interest rate on one part of the loan while allowing another part to have a variable interest rate. That way you can find a reasonable level in terms of how much risk you want to take.
How do I find a good loan with a low interest rate?
Now you may be wondering how to go about finding a really good loan with low interest rates? There are at least a couple of different methods you can use. We will go through these two below.
Contact your local bank directly
Maybe you already have a personal contact at your local bank office? If so, you can contact that person directly. One advantage of this is that the person may already be familiar with your financial situation and have the opportunity and time to familiarize yourself with the issues you have when it comes to borrowing money. You may also have good chances of getting a lower interest rate when you are already known by the bank.
Remember that it is important to negotiate the interest rate when you talk to the bank. Try to highlight the positive in your finances, you may have a permanent position, a co-applicant or saved capital. All that is in your favor you can use as an argument to get a lower interest rate.
Use a loan broker
A loan broker offers you to apply for a loan directly through the web. You fill out a form on the lender’s website and then send the lender further to the banks and lenders with which the lender cooperates. Then A big advantage of this is that you can compare terms and interest rates in peace and quiet and then choose the offer that suits you best. Remember to compare the total cost of the loan, not just the interest rates. As mentioned, there may be additional fees in the form of avi fees and setup fees. When you use a loan broker it is quick and easy to compare the interest rates of different banks. In this way, you make it easier for yourself to find a low-interest loan.
Tips for getting a low interest rate
To get the lowest interest rate possible, you must have a stable and good economy. It is a great advantage if you have avoided getting payment remarks. A payment note can be seen as a warning signal by the banks. This may mean that they want larger margins because they feel that they are taking a risk when lending money to a person with one or more payment notes.
Another way to bring down the interest rate is to have a co-applicant when applying for a loan. An applicant is a person who, together with you as the main applicant, stands as an applicant when you apply for a loan. This means an extra security for the bank if you have a co-applicant. If you probably cannot pay interest and fees, your co-applicant may be able to do so.