Cash loans are loans granted for any purpose by all banks. However, the terms of lending are very different, as are the fees related to the opening and servicing of the loan. If you think that you can find the cheapest cash loan by only comparing the interest rate, unfortunately you are wrong.
How to look at the APR?
The APRC, or the actual annual interest rate, is an indicator that theoretically should inform the consumer about the real and total cost of the loan. This is not the case, however, because the APRC is calculated on the assumption of certain assumptions. Whether they are less or more compatible with reality is one thing, but the way banks make these assumptions at all is a completely different matter. The effect is that even APY is calculated to make the parameter an advertising attribute, so real costs have to be checked differently.
The loan is cheap in itself
The interest rate is of course the most important thing you look at when determining the attractiveness of loan offers. The lower the margin, the lower the interest rate, the better. The problem is that the margin that is responsible for the volatility of loan prices can be manipulated to a large extent. This in turn means that the bank always has the option of transferring some of the costs to those places where you are not looking for them. It is a common mistake to consider the cheapest loan that has the lowest interest rate as the cheapest one. Meanwhile, even APY does not fully reflect the costs. So what to look for?
One of the most disliked by the banks’ customers is the commission and fee for launching the loan, as well as the preparation fee. These three fees appear in many different loan agreements and spoil the borrowers’ sleep. It is not even about the fact that it is difficult for them to find a real justification – banks have the right to charge these fees, although at this stage they do not bear practically no costs or no risk. For the borrower the problem is the amount of these fees and the fact that in most banks they have to be repaid immediately, and they can not be deducted from the loan amount.
Check the bank’s assumptions
In order for the APRC to be an element encouraging to take out a loan, the assumptions must be selected accordingly. So if you are looking at promotional offers, APY is calculated taking into account the fulfillment of the promotion. This may be a specific form of securing a claim, it may be to determine a specific loan amount or loan period. In this case, although APY is obviously calculated correctly, because it is just a substitution of numbers to the formula, does not necessarily correspond to the real cost of the loan you will receive – you may not meet the requirements of the promotion set out in its regulations. Then, of course, the price of the loan will increase, and thus the cash loan, which was supposed to be the cheapest, will become quite average at best.
Do not let your guard down. Bankers’ marketers can even show unpleasant news as an asset – remember that you have to evaluate the loan yourself. The bank’s offer is always at your disposal, but you have to assess which loan will be the least harmful to you (beneficial from the principle is not any, because in each you give more than you borrow) – you have to check the critical points of the contract and looking for the cheapest cash loan , look at all the bank regulations and loan rules. Only then are you absolutely sure that the offer is the cheapest in reality, and not just on paper.