Loan interest in brief

The voices created by the rise in interest rates on loans are not going to go away. In vain, everyone said that for many years there would be no interest rates around 1-2%.

This is how the credit market works, this must be accepted. Can you do it? No, but we can disassociate ourselves and plan ahead to repay our credit. The solution could be a fixed rate loan.

The basis of loans

The basis of loans

We have often described that loans are basically simple contracts. The bank will give us a one-time larger sum, which in return will be repaid to us over a longer period of time with interest.

This is the interest, the profit of the bank, the fee for the bank to advance us the money and “believe in it” to repay it. Simply put, interest is the most important variable that influences how cheap or expensive our credit will be.

The loan has interest

bank

Interest on loans consists of two parts, the reference interest rate and the interest premium . The former is typically the central bank base rate, which is currently 0.9%. To this is added the interest premium charged by the banks on a specific loan. Well, this has risen in the last month and that’s why loans have become a little more expensive. But who is affected?

Concept of interest period

Concept of interest period

Of course, whoever is going to take out a loan now has a higher interest rate on their monthly repayment. And those who are now expiring interest on their loans will also have to count on some increase . Those who have fixed their interest rates for a longer period of time, however, are now happy, as they are not affected by this rise.

Namely, the interest period means the time period during which the interest rate of the loan does not rise , and thus the money to be transferred monthly. As it expires, they will calculate our debt reduction under the new terms.

That is why, for whom security is most important in a loan, they should choose a slightly more expensive loan, but with a long interest period! It is worth using our home loan calculator to make your decision more prudent and easier. And if you have any questions, contact us! Our experts will be there to help.

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