Expensive loans – What is it?

Everyone who lends money wants to do this in the cheapest way possible. Expensive loans are something you definitely want to avoid as far as possible.

Here we will therefore address some reasons why it can be expensive to borrow and also what types of loans cost the most and why they are just that.

What types of loans are the most expensive and why

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As most people know about, it costs a lot to get different types of loans. If you take and list them which ones are the most expensive, it is clearly the micro loans that top that list. After that comes other types of private loans that have very high interest rates. Micro-loans are actually a form of private loan, even though you do not usually divide them.

The very cheapest loans that you can apply for are those where you have to have something like collateral such as a mortgage loan, car loans can also be a loan with collateral and this is often relatively inexpensive.

Micro loans become expensive as it is for such a short period of time that the money is borrowed. It is normally no longer than 30 days that you borrow the money and since it usually costs USD 300 or more, it becomes a very expensive price for a loan of just a few thousand USD. The effective interest rate on these loans is therefore extremely high, even above 1,000 per cent.

Lenders must make money plus cover their costs, so they have to charge relatively high costs if you look at the loan amount. There is talk of usury rates but it is a bit wrong as they actually have to deduct these sums to merge and when you look at the statistics, not many of these companies make any big profits. Then it is obviously up to each individual borrower to consider whether they think the price is reasonable.

The next step is then credits taken when shopping

The next step is then credits taken when shopping

Or ordinary private loans that are of the smaller kind. Interest rates on its loans can often be well above 15% per annum, making them clearly expensive loans. If you instead take a larger private loan (USD 30,000 and up) you will often get a much better interest rate. However, these private loans will never be the cheapest as you have nothing in security for the loan.

This means that the lenders do not feel so confident about getting the money back and their way of dealing with this is to raise prices. To obtain the best possible interest rate, a borrower must take a large loan over a long period and at the same time have a good credit rating. On the contrary and the interest rate will go up in comparison and it sharply.

The cheapest loan you can apply for is a loan where you offer the loan institution something in collateral. This means that if you would not be able to repay the loan as intended, the lender can claim the security for the loan to be paid. So your house can be forcibly sold to cover the loan.

Common loans with collateral are car loans and home loans. What is positive for you is that the lender feels safer to lend money with collateral and this will mean that it will not be as expensive a loan for you as the interest rate will be lower. The interest rates here may be only a few percent per year.

The person can also influence

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On the slightly larger loans, even those who apply for the loan will affect whether it becomes an expensive or cheap loan. If the applicant has good creditworthiness, for example thanks to a good secure income, saved money or something else that shows stability, the chances are that the greatest is possible to get the lowest possible interest rate.

Everything is as usual about risk and if the applicant can show that there is a very small risk for the lender to lend money then the interest rate will often be lower. You can also negotiate the terms of the loan yourself, and this is especially true of mortgages where good arguments can cause your interest rate to fall a bit.