Christmas is coming, the most profitable holidays of the year. You’ll find out in most stores where it has been decorating since October. Many are going to spend much more than they can afford in this period. Not surprisingly, banks and loan companies are heading out to fight for customers.
“Best Loan” or “Lowest Repayment Loan” offers are literally rolled out of us from every ad. And since money is never enough, people are willing to borrow. Unfortunately, the terms of the loan or credit are not always as advantageous as the advertising claims.
So what to watch out for and how to make the right decision?
Before you decide on a commitment, such as a loan, no doubt, consider whether you really need it. Covering is good with the duvet we have. If you have a financial overview, you know what budget you can plan for Christmas. In addition, everything is a luxury that can later become more expensive.
When deciding on a loan, consider how you will be in debt. Sometimes it is better to buy in installments than to borrow in advance. If you have decided to go into a loan or a financial loan, consider how much you really need to borrow.
Do not borrow 2000 USD when thousands are enough. Money will go away quickly, but you will get rid of debt for a long time. Think about how big your monthly payment will be and whether you will be able to pay it throughout the repayment period. Any new commitment will burden your budget in the future.
How to choose a loan?
Don’t be fooled by ads that don’t have to tell you in detail about all the circumstances of getting a loan. The formulations such as “the lowest installment only with us since…” or “we have the best offer for you” are too general and incomplete.
Indeed, the lowest installments may start at the amount you hear in advertising, but this may not be the case. You should check the offer yourself. Choose according to what you really need and according to the real conditions of the loan.
Do not make quick decisions and study the offers well.
If banks do not want to lend you and you turn to non-bank institutions, your caution should be doubled. It is easier to get a loan, but it can be much more expensive.
Low interest is another argument that financial institutions are trying to sell their product. A loan for only three, five, or seven percent may seem advantageous, but the interest rate does not give an accurate picture of the total price you pay for the loan. The so-called annual percentage rate of charge – RPMN – is more telling.
RPMN is a percentage that expresses how much money the consumer pays extra. It includes not only interest but also other fees related to the loan. These are, for example, fees for handling the loan, maintaining a debt account, insurance against default and the like.
Two different banks can offer a USD 2000 loan – the first with 5% interest and the second with 6% interest. At first glance it seems that the first bank is clearly more profitable. It doesn’t have to be true.
The first bank charges a fee of 2% of the loan amount compared to the second bank.
All fees should be included in the RPMN, which represents the total cost of the loan.
Unlike the interest rate, the RPMN is always stated on an annual basis (interest can be calculated weekly or monthly) and will help you evaluate the advantage of the available loan.
You must also be careful with RPMNs. If you want to compare two financial products using RPMN, they must have the same parameters or you will not get a real overview of their profitability.
By law, banks and non-bank financial corporations are required to include RPMNs in each bid and contract. Did you not find the entry in lowercase letters? Consider the loan agreement as interest-free.
Council in conclusion
It may happen that everyone needs a financial injection. If you find yourself unable to repay the loan, try to resolve the situation. Usually, the bank and the non-banknote will not go away, so try to communicate as soon as possible and agree on new conditions.
We wish you much patience in the pre-Christmas period and only the right financial decisions.