In the search for cheap loans, sooner or later the question arises as to which loan should actually be understood as the cheapest loan – a question that cannot be answered as a whole, as long as one possibly refrains from the repayment-free financial injections of any federal or state funding programs. How expensive or cheap a loan is always depends on several factors that differ greatly from bank to bank or depending on the type of loan.
Cheapest loan in the credit market
The creditworthiness of a borrower is the decisive factor in many loans when it comes to the question of the terms of the loan and thus the amount of the total costs. This can be seen in advance for the borrower by means of the footnote “credit-dependent”, which banks, if applicable, must apply when applying for their loans.
If the conditions or interest on a loan depend on the creditworthiness of the debtor, this means that if the creditworthiness is very good or good, you will receive a favorable debit interest, and if the creditworthiness is mediocre or bad, the debit interest will be mediocre to bad. Additional fees or ancillary credit costs are added to the borrowing rate – in the case of credit intermediaries, for example, processing fees, commissions and agency fees.
If the interest or credit conditions are not dependent on the creditworthiness of the debtor, they depend on the amount of the loan or the duration of the selected term. The intended use can also influence the total cost of a loan – for example, investment loans can often be cheaper than pure personal loans or car loans.
The longer the term of a loan, which usually goes hand in hand with the amount of the loan, the further the interest rate generally falls – however, of course that does not mean that the total costs decrease: each additional month of term also means additional costs that the borrower must wear.
However, there are other factors that can turn a loan into a cheap loan: These include, for example, special repayments. Many banks charge fees if the borrower wants to make special repayments – within the fixed interest period, which can also be a factor that increases the cost of the loan, early repayment is always due for early repayment.