Ever heard of the so-called ” golden triangle of investment “? This is basically a matter of considering three, from an investor’s point of view, key investment elements: security, investment availability and return . Now, one or the other reader may wonder, what does this have to do with a loan? A question that we too have asked ourselves: is there anything like a golden triangle in terms of credit? 3 basic elementary things to consider when making a loan? A question that we can answer with a clear “yes” based on our experience based on appropriate evaluations of our lending business. In fact, in the business of credit, of whatever kind, there are three key metrics that affect the value of a loan, whether it turns into a cheap loan or a credit trap.
Interplay of loan amount, term and interest – but how?
Basically, the three most important key figures in taking a loan are all known and therefore no secret: loan amount, repayment term and the effective interest rate per year . So far so good. But how do these 3 basic data actually work together? Because how they relate to each other, at least at first glance, is hardly recognizable to ordinary gas users. While the consumer influence in terms of loan amount and term is fully given, that influence on the interest rate is completely eliminated. The only way is to find the lowest-interest loan offer for your needs.
The fact is: banks always lend out their own criteria. And their main influence is to make a loan cheaper or more expensive, the design is just that effective annual interest. And to make these interest rates applicable to different types of loans, banks have many tools at their disposal. In sum, it can thus be stated that the basic elements for a favorable loan are as follows: current interest rate level of the ECB, creditworthiness of the borrower, as well as the term and the loan amount. However, it is also to be understood that a general rule in which combination of term and loan amount of the loan is the cheapest, does not exist.
The faster a loan is repaid or redeemed, the cheaper it usually gets. This is partly because interest rates are incurred over a shorter period of time. On the other hand, in some cases interest rates generally fall for shorter maturities. Here, however, it must be ensured that the credit installment remains affordable. In addition, there is always the right to secure special repayments and early loan repayment – preferably without any additional costs.
Align loan amount to real needs
The fact that the loan amount has an impact on interest rates is rather rare. When choosing the right loan amount, you can therefore be guided by your personal needs and your financial possibilities for repayment. In a nutshell: Actually only absorb the amount that is really needed .
Do not categorically exclude credit counseling
Despite the first two rules of thumb, there are always exceptions and special offers. There are banks where interest rates rise with maturity and those that require lower interest rates for longer maturities. The loan amount is similar. It can sometimes be worth making small changes in duration or amount to save yourself some money. Therefore, you should not refrain from talking to an expert when making a credit comparison .