The interest rate is one of the factors to be absolutely taken into consideration when it comes to choosing a loan: here’s how to find the most convenient one.
The interest rate is the cost to pay to borrow money and is the most significant item of expense, but not the only one, among those that inevitably end up in the monthly installment. In fact, before signing any loan agreement, you must also pay attention to other expense items, such as the ancillary expenses envisaged for the management of the file, which make the repayment even more onerous.
In online loans, the estimates are now processed almost instantaneously thanks to special calculators that return the interest rates applied: to make a careful and informed choice between the financing solutions offered by the various financial institutions, you will have to compare the TAN (Nominal Annual Rate), i.e. the interest rate applied by the credit institution on the loaned money, and the TAEG (Global Effective Rate), which corresponds to the total cost of the loan, including of all charges and expenses for the management of the practice.
Younited Credit makes this calculation procedure even simpler and faster, allowing you to receive an immediate and detailed loan estimate by entering 3 data only: your purpose, the amount of the loan and the monthly installments within which you prefer to repay it.
In any case, if you intend to choose a personal loan you should know how the installment of a loan is calculated and understand if the interest rate applied is convenient. Let’s start immediately with the definition of interest rate and which one to consider to compare different loan proposals.
The interest rate
The interest rate required for the disbursement of the loan is expressed by the TAN, the nominal annual rate, through which the interest expense due on the borrowed sum is calculated. The interest rate can be of several types:
• Fixed: the interest rate indicated in the contract remains constant for its entire duration;
• Variable: the interest rate is established in the contract but is periodically recalculated on the basis of specific parameters (the most common are the Euribor indices);
• Mixed: in the presence of specific conditions indicated in the contract, the interest rate changes from fixed to variable or vice versa;
• Facilitated or zero: the interest rate can be reduced or zeroed in specific cases.
The TAN can vary from bank to bank but also according to the purpose for which the loan is requested. In any case, this interest rate is not exhaustive of the total costs of the loan, which also include the costs of the preliminary investigation, the management and collection charges of the installment and any insurance costs. All these costs are therefore taken into consideration to calculate the APR, through which it is possible to understand if the proposed rate is convenient.
Compare interest rate
Loans are not all the same and under equal conditions there may be substantial differences in the calculation of installments that only those who are well informed can notice. We have seen that comparing only the interest rate applied by the credit institution (the TAN) is therefore not sufficient. There are other variables to consider - also paying attention to any hidden clauses in the contracts - which could be decisive in the choice of financing.
Through Younited Credit’s loan simulator, you can find out the overall interest rate of the offer for free and in just a few steps, comparing the APR relating to offers on equivalent terms and amounts. In fact, the APR summarizes the total cost of the loan in a single indicator, allowing you to make the most convenient choice between different proposals.
Original article published on Money.it Italy 2023-01-18 08:50:00. Original title: Tasso d’interesse: tutti i consigli per capire se è conveniente
