If you are low on liquidity and you have to face unexpected expenses, the first thing you will surely have done was to go to your bank.
If your credit situation is stable and your application has been positively assessed, they will have you presented with a quote, full of percentages, complicated terms and quite incomprehensible.
How to understand if it is a convenient quote? Is it better to stop here and not waste any time or get other bank loan quotes?
What are the indices to consider?
Finding your way through the various criteria for comparing a loan is not so simple. But with some tricks and doing a bit of clarity on some terms, you can make a more conscious choice. The two main indices, which must be reported in bank loan quotes and which you will need to consider are:
- the TAN: net annual rate
- the APR: annual percentage rate of charge
In particular, pay attention to the APR, because it takes into consideration all the expenditure components of your financing.
How does a loan work?
Before going into detail on what to look for in order to evaluate its convenience, we must briefly brush up on the notion of loan and its exact functioning, which are not always clear.
Loans are at fixed annual nominal rates and constant monthly installments. This means that every month the same amount is paid, the monthly installment, made up of interest calculated according to a fixed percentage (the nominal annual rate) and of the financed capital.
Since the capital drops a little every month, the interest payable falls accordingly. The constant installment therefore hides interests that go down continuously and an ever-increasing return of capital.
The elements that impact on the installment of each loan are:
- the financed capital (the amount you borrow)
- the nominal annual rate
Do not forget in the end that there is another element to keep in mind, any other incidental expenses and commissions to be paid.
Affordable loan = lower installment?
The first thing you typically evaluate in a loan is the installment, which is how much the loan will cost you each month.
It is right to do it, in fact first of all you should ask yourself if a loan is sustainable compared to your monthly income. But the installment is not everything! Looking at just the installment is not enough to judge the convenience of a loan or to compare different loans with each other.
If you think you will have difficulty paying the installment, the best way to lighten the burden is to increase the loan term. This will allow you to lower the monthly payment.
However, keep in mind that, as the loan term increases, it is true that the installment is always smaller and more sustainable, but the overall expense increases: logically if you borrow money for a longer time, you will pay more interest. Increasing the duration to improve sustainability therefore has a cost and evaluating a loan only on the basis of the installment does not give a real idea of the expense.
In addition, the installment does not necessarily include all the commissions: for example, some operators charge an initial commission separate from the installment, while most add some expenses to each installment, such as collection.
How then to understand if a loan quote is convenient and to compare it with others?
How to choose the cheapest bank loan quotes
Let’s go back to the indicators we talked about earlier: The TAN is the percentage rate at which the loan is made. It would be sufficient to look at it if the loans had no other cost beyond the interest rate; but since all loans have some type of expense or commission, it doesn’t say anything on its own.
On the other hand, the APR is the rate that includes all incidental costs. But in most cases these costs occur at the beginning of the loan and in the calculation of the APR they are spread over the entire duration. This means that as the term increases, the APR drops, giving the illusion of a cheaper loan. But as we had already seen in the case of the installment, it is not so.
Finally, let’s summarize the information with tips for finding a cheap loan:
- look at the installment to understand if the loan is sustainable and the total amount due to understand how much it will cost;
- considers all expenses, which may not be included in the installment;
- try to reduce the duration in order to spend less, obviously keeping it sustainable compared to your income;
- tries to compare the different loan offers for the same duration.
Where to find the best bank loan quotes?
Today the easiest and fastest way to get a bank loan quote is to proceed online.
In fact, it is no longer mandatory to go to the branch of your bank or to a financial office to start practices, but the procedures that can be carried out comfortably from home through the use of a computer or smartphone.
But how long will I waste getting and comparing all bank loan quotes?
Very little, with a comparator.
By entering some basic data, you will be able to see the different options available in relation to your profile.
What are you waiting for, try it now … it’s free!