Compare loan interest rates

17 Mar

Before you take out a loan, you should always compare the current loan interest rates of the different providers. After all, interest rates often differ considerably: In 2018, borrowers paid an average of 5.58 percent effective annual interest on a loan in 2018. Those who had compared and taken out loans via Across Lender only paid an average of 3.76 percent. Interest rates vary not only between banks. At many financial institutions, the interest also depends on the personal creditworthiness of the borrower. It is therefore worthwhile to do everything correctly, not only when comparing the various offers, but also when applying for a loan. You can find out here how your personal loan interest is calculated, how you keep the costs of your loan as low as possible and how you can use the Across Lender comparison.

The interest rate decides how expensive an installment loan is. Still, comparing different consumer loans can be a bit confusing. Because the banks usually state a whole range of different interest rates. Interest rates are often dependent on the creditworthiness of the borrower and are therefore given as a range. At first, loan seekers do not know which loan interest they will actually receive from a bank. In order to be able to calculate and compare your expenses for loan interest, you should always use the annual percentage rate.

The most important comparison value: the effective interest rate

In contrast to the borrowing rate, the annual percentage rate includes all costs. These include various fees as well as expenses that are directly related to the term and the repayment. Only the costs of a voluntary residual credit insurance are not yet included in this amount.

If the annual percentage rate is given as a range, the interest rate depends on the credit rating. With these loans, your creditworthiness, ie your creditworthiness, determines the amount of the interest due. Your personal interest rate lies between the so-called discount rate, also known as the minimum rate, and the maximum rate. In order to be able to compare credit-related loan interest rates, it is best to use the so-called two-thirds rate as a guide. This is the interest rate at which two thirds of all borrowers receive the loan.

In all other cases, the APR is given as a fixed value. It is then an interest rate that is independent of creditworthiness. However, this does not mean that the loan is granted without a credit check. However, all borrowers who have sufficient creditworthiness receive this loan at the same interest rate.

Which is the cheapest interest rate that you can get when comparing the different offers, always depends on your credit rating. You can use the Across Lender credit check, for example, to determine how good your current credit rating is.

Regardless of whether you want to compare different offers with fixed interest rates or apply for a credit-dependent loan: you usually get the best loan interest when the bank classifies your credit rating as particularly good. The bank will then assume that you will repay the loan with great certainty. Each bank has its own approach to credit checks. However, the following aspects are usually in the foreground:

Free disposable income

money loans

A high regular income can often help you find cheap loan interest. The more you earn, the easier it will be for you to pay the monthly loan installments. However, the banks also take into account your regular expenses. Because the money that you spend each month on rent, insurance or maintenance payments is no longer available for the monthly loan installment.

Income security

Income security

The safer your income is, the more likely the bank is to assess your creditworthiness positively. Therefore, it is usually difficult to get cheap lending rates when you are still in the trial period. If your contract of employment is limited, it should, if possible, not end within the term of the loan. For this reason, civil servants often have particularly low interest rates. For the self-employed, on the other hand, there are often separate loan offers that do justice to their particular financial situation. Students in turn can apply for a special student loan, in which the money is usually paid out in monthly installments.

Credit record rating

Credit record rating

Credit agencies such as Credit record also play an important role when it comes to assessing your creditworthiness. If the Credit record rating is too bad, you may not even get a loan at all. With interest rates dependent on creditworthiness, you may only get the best interest rate if your Credit record score is above a certain value that the banks set individually for themselves.

Additional collateral

Providing additional collateral can also have a positive impact on the interest rate. For this reason, it is often worth stating the purpose of the loan. With a car loan, for example, the new vehicle can serve as security. Modernization loans are often particularly cheap because the property offers additional security.

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