Loan rates can vary from bank to bank. But not only the individual providers offer each a different interest rate for loans. Because the conditions also depend on many other factors, such as the term or the credit rating. In our loan interest comparison and especially in the guidebook we inform about all these factors as well as about the aspects that should be considered. In addition, we reveal the current loan interest and explain why you should not apply for a loan arbitrarily despite low interest rates.
Lending in comparison – all providers
8 facts about “loan interest rates comparison”:
- The interest rate usually depends on the duration, the loan amount, the available equity, the fees and the credit rating.
- If you have a good job, a regular income, almost no further debts and thus a good credit rating, you will probably get a cheap loan.
- The higher the term, the higher the interest rate on loans.
- Mortgage lending is often cheaper than consumer lending because of its collateral and large loan amounts.
- The lower the loan amount, the lower the interest and the higher the fees.
- For the loan interest rate comparison, the provisions regarding special repayments should also be taken into account.
- A loan calculator can give an overview of the different providers when comparing.
- In contrast to a installment loan, mortgage lending can not be applied for a free purpose.
1. What is important in the loan interest comparison?
If you compare your loan interest rates yourself to find the cheapest bank loans you should pay attention to some aspects:
- First, it is important to pay attention to the term. Because this plays a crucial role when it comes to the amount of the loan interest. It is advisable to choose not too high rates and therefore not too short a running time. On the other hand, however, one has to say that loans with shorter maturities are cheaper. Overall, one should therefore find a suitable mediocrity.
- On the other hand, one should look at a loan interest rate comparison not on the borrowing rate, but on the annual percentage rate. This is because all fees have already been included here.
- It is also advisable to use an online loan calculator to calculate the approximate loan interest rate. With this one must make only term, loan amount and under certain circumstances some further information concerning the own desires and the own capital. Subsequently, this shows good and cheap credit institutions with different offers.
- You should also look at the forms of credit. Because there are various loans, such as the installment loan or the credit line. In these two, however, the installment loan is clearly more advantageous. This is partly due to the cheaper loan interest rates and partly because of the fixed interest rate. Because the interest can rise in the credit line up to about 14 percent. A installment loan comparison shows the possibilities and advantages over the dispo.
- In addition, it is advisable to pay attention to what is important to yourself. This can be, for example, the flexibility, the loan amount or similar. The conditions are often not unimportant. So there are some providers who require, for example, a Private credit information and others, where you can sometimes even get loans with negative Private credit entries. However, here it may be that the loan interest is higher.
- Furthermore, you should think carefully before a comparison, which loan amount is needed at all and whether you can repay them or how many months or years you can repay them.
Who wants to start a loan interest comparison, should consider several aspects
2. 5 factors that determine the loan interest
Borrowing rates are usually dependent on certain factors. Because only a few banks have one and the same interest rate for all borrowers on offer.
As already indicated, the loan interest rate depends, among other things, on the duration. In the phases of the low interest rate, the higher the term, the higher the interest rate. This is because over a long period of, for example, ten years, interest rates may also rise. So that the bank has a compensation in such cases, it raises interest rates from the beginning. In phases of the high interest rate, however, this is exactly the opposite.
In addition, the amount of the loan also affects the loan interest rate. However, it is the case that loans with a lower amount often receive the cheaper interest rates. The reason for this is that low loan amounts are repaid more often than high loan amounts. But here are the fees again higher. Therefore, this can sometimes compensate again and is therefore not necessarily beneficial.
The fees also play a role in terms of interest on loans. Because these are calculated on the effective annual interest. This includes all administrative, processing and account maintenance fees. For this reason, you should look at the comparison not synonymous to the borrowing rate, but pay attention to the annual percentage rate.
The credit rating indicates how creditworthy a person is. In particular, the income, the profession and the debts are important. For example, banks pay attention to the fact that they regularly receive a certain wage or income, that the job is secure and that as few other debts as possible exist. If you have a good credit standing, you usually get a lower interest rate.
However, equity can also play a role in part. Because this shows the banks how much you contribute to the desired purpose. Of course, the more equity one owns, the lesser the amount of the loan, of course, and the lower it is, the lower will ultimately be the interest rates.
3. Which loan types are there?
However, interest rates on loans also depend on the loan type. So there are different types of credit that you should know if you want to apply for a loan.
Mortgage lending / real estate financing
The construction and real estate financing usually offers more favorable conditions than consumer loans (see mortgage loans ). This is because here the credit sums are much higher. In addition, the borrowers usually have some equity capital and can thus pay part of the property themselves. This in turn reduces the loan amount a lot.
Another reason is that the built or purchased property itself represents a security for the bank. Because the rights are retained by the lender. That is, if you do not pay on time, the bank can auction or rent the house or apartment. The profits from it eventually go to the bank.
It is also important to know that mortgage lending is always tied to the property. That is, with the loan amount you can either buy or build a house or apartment. Alternatively, however, it is also possible to renovate, renovate or modernize a particular building. However, the real estate loan can not be used for other purposes.
In addition, it should be noted that this loan is often not fully repaid during the term. Instead, there is a percentage repayment that often leaves a residual debt at maturity. This can be calculated by determining the repayment amount. If, on the other hand, you have made special repayments in between, it may be that there is no residual debt, as these have already been compensated for by the interim repayments.
The follow-up financing, however, is used for real estate loans. Because this can be applied for as soon as the fixed interest period is over and the loan has not yet been fully repaid. In such a case you need another loan as a customer. This can be done either at the same provider or at another bank. It is advisable to compare the terms and interest rates for loans here as well.
With this loan, you can secure interest before you even get the loan. That means that the loan is ready and can be used later. However, in most cases, banks charge additional interest rates on the interest rate.
4. Cheap loan interest rate for real estate finance currently available
Current loan interest rates look very favorable at the moment, especially in the area of mortgage lending. For many people, this is a reason to strike and take out a loan. However, this could also be a mistake, because it is still a loan that needs to be repaid.
That’s why you should think twice about which loan to take. For this it is important not to overestimate yourself and not to calculate the duration too tightly. Here are some things to consider before you sign a contract:
- On the one hand, interest rate retention should be taken into account. If the interest rate is fixed throughout the term, you are definitely on the safe side. Because with variable interest rates for loans you go into a so-called interest rate risk. After all, interest rates can get higher here. This can automatically result in higher costs that were not expected. Often, however, bank loans are invested with terms of up to ten years with a fixed interest rate for the entire repayment term. can be seen here in the bank loan comparison 2019. For loans with longer maturities, however, you will usually receive a variable interest after the tenth year.
- Second, you should, as already mentioned, the term is not too short. Because too short a term, while you can benefit from cheaper rates, but in the long run probably have difficulties to pay off the monthly installment. Finally, one should not forget that you might also want to buy something or need money for the holidays, the restaurant or the cinema.
- At the same time, it is important to retain the option of special repayment. Because this can pay off the loan if necessary earlier, so this is cheaper in retrospect. This is especially important, as it may happen that sooner or later you get a little money. This can be done for example by a profit or by simply saving money. At best, this loan repayment should take place without any costs. Unfortunately, many banks take a prepayment penalty and sometimes processing fees.
- In order to be protected against short-term shortage of money, you should protect the property accordingly. After all, you may be unexpectedly unemployed or incur unforeseen expenses. Here you should therefore have the opportunity to suspend one or more monthly installments or to survive without many additional costs.
For these reasons, one can finally say that it is important to put aside a little emergency money and compare offers. So you not only get a favorable interest rate, but can also secure a loan agreement. You should not forget the flexibility.
At the moment, we are in a period of low interest rates, where you can benefit from favorable interest rates
5. What else should you pay attention to?
In addition, there are a few other factors to watch out for. This includes, for example, the question of whether a life extension in emergency situations is possible. This can be helpful if you lose your job or just have a financial shortage because, for example, your car broke down. In addition, it is also important to know if early replacement is free of charge. By law, you can repay prematurely in any case, but some banks take a prepayment penalty of up to one percent. In addition, you have to choose between a branch bank or an online bank. Furthermore, you may also have some other questions that are (still) unanswered. Of course, one should also go into the comparison on these closer.
6. The conclusion: Comparison is important
All in all, we can conclude by looking at many aspects before concluding the contract. So you should think carefully, which loan amount you need and what duration you want to take. In addition, the flexibility, the type of credit and the other factors should be kept in mind. After all, not only the loan interest rates are important. However, these also depend on all these factors.
For example, interest rates are rising at the moment, for example, when the maturity is higher. This is because the current loan interest rate is currently usually very low and this interest rate would otherwise apply for the entire life of, say, 15 years. However, since banks do not want this, they offer a higher interest rate for longer maturities as compensation. In summary, it can therefore be said that a loan interest and a bank loan comparison are important.