At some stage in our lives, most of us need to borrow some money to make a big purchase or to cover some unforeseen costs. Hopefully, you’re looking for a loan to help you attain a necessity, something you really need to help you in your daily life, and not your dream holiday!
A little recap on Loan Costs.
As you know, the cost of borrowing money is called ‘’interest”. It is money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of debt. To the borrower, it is the cost of “renting” money. Simple enough.
Interest is the charge for the privilege of borrowing money for the advantage to spend / consume in the present instead of having to wait for the future to do so.
Clearly, it is important to know what interest rate you will be paying when taking out a loan as this has a big influence on the loan cost. This will determine your monthly repayments. The repayment term in which you may pay back the debt will also influence your instalment amount.
If you’d like to look at a good example at determining your preferred interest rates over a specific repayment term, take a look at the BetterLife Personal Loan Rate table. This will give you a great idea of how your interest rate is influenced over various timeframes. You’ll notice that the longer your repayment term of a specific amount, the greater amount of interest you’ll need to pay - affecting your overall loan cost. This is due to the effect of compounding interest - which is basically interest earning more interest.
You now know why it is vital to have a clear understanding of every single fee or loan cost associated with taking out a loan. If you’d like to move on and start comparing loans, you’re welcome to make use of the Fincheck Loan Comparison Page.