At some point you will find yourself in a situation where you have to borrow money. But this is the first time you borrow, you may come across concepts that you haven’t heard before. You don’t have to know all the concepts to the point. But there are some concepts that are important to learn before you take out your loan. By mastering the following five concepts, you will be better equipped to apply for your first loan.
APR stands for Annual Cost Percentage and is probably the most important figure in terms of loan comparison. The APR is the annual cost of the loan. This is inclusive of fees and foundation costs.
Regardless of the bank or private loan provider, everyone must inform the OPP on loans. The reason is due to the Credit Agreement Act and the purpose is that you can compare the costs of several loan providers. But when comparing the OPP, it is important that you have the maturity in mind.
Looking at two AOPs, each with a different maturity, can result in a misleading comparison. Therefore, it is a myth that quick loans are more expensive due to a higher APR. Namely, mortgage loans have a shorter maturity than other types of loans.
The maturity is the full period in which you repay your loan. That is, when you borrow with a 12 month maturity, it is during this period that you have to repay your loan. But keep in mind that a long maturity may not be the best solution. When you borrow a small amount and have a long maturity, you may end up paying unnecessary interest.
At Alceste you can borrow up to 15,000, – in credit for 12 months. With our credit you can pay off the loan whenever you want and only pay for the days on which you borrowed money.
The principal is the initial amount you want to borrow including costs. Here, however, the principal also covers any foundation costs and loss of costs. So, you may have to borrow a little over your desired amount, depending on your loan provider. Your principal will not change during your loan period unless you:
- Rescheduling your loan
- Increases your loan amount
- Switching loans
The repayment rate is also another expression of effective or nominal annual interest rates. It is at the annual debt interest rate that interest accruals are included. Therefore, the loan interest rate may vary depending on the interest accruals that are in the loan term. So when it is high, it is due to a frequent interest rate hike. This type of interest rate is fixed and can therefore give you an overview of how much you will pay in interest.
The available amount is used by the creditor to judge whether your finances can fit with a loan. The available amount is the amount you have left after all your fixed expenses have been paid. For example, it is the money that goes to food, clothes and pleasures. Depending on how your lifestyle looks, your amount of availability may vary.
If you live with your family, you may have several variable expenses. This may require a higher availability of your loan provider. If, on the other hand, you are single or in a couple relationship with children, the loan provider usually requires a lower amount of availability. An available amount therefore varies according to what your lifestyle looks like, why it is the creditor who assesses what they think is sufficient before you can take out a loan.