All loan costs
In the case of loans – regardless of whether cash or hypothetical, the borrower decides to borrow from the lender, which is usually a bank, a certain amount of money. When paying off the debt, the capital amount is increased by additional fees that every bank customer should know about before signing the contract. At the same time, it is important for the client not only to know about such fees, but before signing the binding papers he should be aware of their amount in the bank’s offer, which he decided to use.
Bank charges – Interest rate and commission
The interest rate is the most important information for customers about the loan they want to take. The interest rate determines how much each installment of the repaid debt will be increased. If the interest rate is 10%, the amount of USD 1,000, the installment in the 10-month contract will be USD 110. However, even at low interest rates you should be careful. It may happen that they will be low only for part of the duration of the contract, which will certainly be notified to the client in the contract. Later interest rates can then be much higher, which means that the loan will be less profitable than one with a fixed interest rate. The commission, on the other hand, is a one-off remuneration for the bank for lending money to the borrower. Since the change of laws, the commission on cash loans has been growing steadily. The customer should be careful again. Banks decide to reduce or completely eliminate interest rates to tempt customers. The amount of commission compensates for their losses and the loan proves to be much less favorable than with a higher interest rate, but with a lower commission.
Especially in the case of higher amounts of debt, loan insurance is extremely important. It protects both the borrower because he will not be on the list of debtors and the lender because he will recover his money. After paying a specific amount to the insurer, one-off or paid in installments, he undertakes to repay the entire loan if the borrower is unable to do so for the reasons specified in the contract. Usually it is a sudden loss of job, reduced income, death or illness causing permanent disability. For the bank, this is a guarantee of securing his money, so he either proposes to lower the interest rate for customers who decide to take out insurance or there is a point requiring the borrower to take insurance or charging his costs in installments.