How to choose the best loan?

The cost of a loan is by far the most important factor to pay attention to. Many people make the mistake of focusing only on the nominal interest rate of the loan. However, the nominal interest rate does not include any loan costs, except for the interest rate and the bank’s profit, it does not show the total cost of the loan.

The best indicator is the effective annual interest rate. The annual interest rate displays as a percentage all the costs associated with the loan, including all additional costs such as the account management fee, the opening fee or the withdrawal fee.

The opening fee is the cost charged to the invoice for the implementation of the loan, the amount of which depends on the size of the loan amount. The account management fee is an additional cost associated with the monthly repayment of the loan, a kind of surcharge for invoicing, usually amounts to several euros, but large amounts can accumulate over long periods. The withdrawal fee is either a fixed pre-determined amount, or a certain percentage of the loan amount received.

Since loans include a wide range of additional costs, when comparing loans, you should always compare the effective annual interest rate. The effective interest rate is a figure that says something about the total cost of the loan, including all interest costs and commissions. The effective interest rate depends on the amount and term of the loan, as well as on your credit rating.

Now there are many sites that supposedly compare loans, you submit one application and receive several offers from different lenders. But it is worth considering that you will receive offers only from lenders with whom this site works, in addition, it is worth taking into account the financial interest of the comparison site itself, there is not always confidence that you will be offered the best loan option, it may turn out that this option is simply financially beneficial for the comparison site.