Applying for a Loan: Do You Know Everything You Should Consider?

Applying for a Loan: Do You Know Everything You Should Consider

The seventh increase in interest rates by the ECB is already bringing about changes in the main banking entities of the Eurozone. While just a year and a half ago rates were at 0%, today they stand at 3.5% due to various decisions made by Lagarde. The objective of this measure was justified as a solution to control the inflation that emerged in Europe after the war in Ukraine, leading to increased prices not only in energy, fuel, but even in food.

However, a year later, the measures seem to have not fully tackled the underlying inflation, and the cost of borrowing money continues to rise.

Informing Yourself about Credit Options

Getting information about credit possibilities nowadays involves the internet. Fortunately, there are now websites like BetterCompared that allow users to compare the credit offers available in the market, including not only banks but also credit agents and financial companies that offer these types of services to individuals.

On these websites, you can see the evolution of interest rates, opening fees, and even the maximum amounts and repayment periods offered.

What Should You Consider Before Applying?

1) First and foremost, it is crucial to review the conditions of the different available options to ensure that you choose the one that best suits your personal situation and needs. It is not the same to apply for a credit that needs to be repaid within weeks and is more focused on paying off amounts while receiving the money, as opposed to those that allow for longer repayment periods and function as a traditional loan.

2) Secondly, it is important to accurately calculate how much money you will need and for what purpose. Trying to request more than necessary is often a mistake because it comes with additional expenses that could be avoided.

3) Is there any way to reduce the cost of the loan? If you can save money for a reasonable period or even find other means of financing, it is the right time to lower the amount of money you need to borrow.

4) Considering all the details. Knowing all the details is crucial. It is essential to find out if there are any opening fees, additional expenses, closing fees, or penalties for late payment. Without this information, it is impossible to accurately calculate any loan.

5) Calculating the Interest costs. Calculating the cost in terms of interest is important. With the recent increase in interest rates, it is clear that loans are more expensive than just a couple of years ago. However, if the need for a loan arises now, it is necessary to calculate the price to be paid in interest over its lifetime to determine if it is worth it.

6)Assessing Monthly Payment Feasibility. Calculating whether the monthly payment poses a problem is essential. Initially, it may be a relief to have money when bills are piling up, but it is crucial to assess whether paying the agreed amount each month will be a challenge.

Examining the Other Side: Savers

This rate hike also has another side: savers. They are the ones who can benefit from the increase in interest rates, as their savings can generate more income through higher interest rates.