Due to the low interest rate, the threshold for taking out a loan is much smaller than, say, five years ago. Nevertheless, we notice that many people still pay too much for consumer credit. This can be avoided very easily by not falling into the following pitfalls.
1. Take out the wrong loan
More and more banks are embracing the digital loan. This ensures that it has never been so easy to take out consumer credit on your own. Digitization also has a downside: the personal advisor disappears from the picture. So there is no person who can point you in the right direction. That can, however, be crucial if, for example, you want to take out a car or renovation loan. The rate of those products depends on the project that you want to finance. If you do not pay attention, you risk applying for the wrong credit and thus paying too much.
With a renovation loan, for example, you have the choice of a normal renovation loan or a green loan. Anyone who opts for a renovation loan in that case, while actually being eligible for a green loan, pays hundreds of dollars too much. Our comparison shows that the cheapest green loan is more than 80 basis points cheaper than the cheapest renovation loan.
It is not always clear to consumers who take out credit online when they are eligible for a green loan. Every bank uses its own criteria. At one bank, at least 50 percent of the credit amount must be spent on energy-efficient renovations, while another player only grants a green loan if 80 percent of the work is energy-saving.
Even those who take out a car loan must dive into the conditions to be sure that they select the right credit. The rate depends on the type of car. For example, a credit for a new car is cheaper than that for a second-hand car. That is where the shoe pinches. While one bank speaks of a second-hand car as soon as it has been on the counter for two years, the other bank does not increase the rate until the car is older than three years. That does not make it easier to compare car loans.
2. Take out a loan with the same bank
Once a person has established a relationship of trust with a bank, that person is not inclined to visit other places for his financial needs. However, you can save a lot of money that way. When you take out a credit with your trusted bank you are not sure that you have the cheapest rate on the market. The difference between the cheapest and most expensive personal loans can amount to 5 percentage points or more.
For example, anyone who wants to borrow 10,000 dollars (with a term of 48 months) can save up to 1,100 dollars by choosing the cheapest credit. Do you want to know from whom you get the cheapest personal loan? Make the comparison here.
3. Stick to the term and the loan amount
Borrowers who want to take out a loan have a certain loan amount and duration in mind. Some refuse to deviate from this. However, it can be worthwhile to add water to the wine. Certainly who is looking for a personal loan can save a lot of money by being flexible. This is because the APR of a personal loan is highly dependent on the loan amount and the term. The difference can sometimes amount to a few percentage points.
For example, those who borrow 15,000 dollars from Moneybeat Finance via a personal loan and repay that amount within 48 months will receive an interest rate of 5.9 percent. If you shorten the duration to 42 months, the rate will fall to 4.49 percent in one fell swoop. That is a saving of more than 600 dollars.
For other consumer loans (such as car loans, renovation loans), the impact of the term and the loan amount are very limited. Many players apply a uniform rate for all durations and loan amounts.
4. Choose a loan too quickly
The question remains of course how necessary the credit is. After all, a loan is accompanied by a number of obligations. For example, the lender expects you to repay the credit correctly each month. If you do not do this, you will be blacklisted and the lender may charge you extra costs in the form of default interest.
Therefore always check whether a credit is the right choice. For example, you could consider saving first in order to reduce the loan amount in the near future or to fully fund the purchase of the desired product.