Loan interests

It is important for everyone to know what costs they have to pay on their new loan.

However, calculating interest is something that is not that simple. In the first instance, for example, every bank or other financial institution can charge other interests perfectly and that not only the amount but also the type of interest can vary considerably. For example, we distinguish fixed variable interest rates and given the fact that an interest is seldom or never legally established, each party has (within certain limits) the possibility to decide for themselves how high or how low they are. In this article we would like to tell you at least how you can calculate your interests in order to find out the exact cost price of your loan.

Do I use fixed or variable interest?

The first point you need to take into account is the type of interest you choose. There are fixed and variable interests. A fixed interest is an interest that is always calculated at a constant percentage while a variable interest as the name suggests may fluctuate considerably. Both interests have their advantages and disadvantages, but each and every one of them exerts a very large influence on the final cost price of your loan. It is therefore always advisable to always look carefully at the difference in cost price between the two loans before finalizing a financing. If you do not do that, the chances are that you will eventually have to pay a lot too much while it could actually have been quite different. So do not underestimate the influence of the interest type.

The evolution of interest

Whether you use fixed or variable interest, it is always very interesting to have a clear picture of the evolution of the interest in question. The evolution of an interest is, however, mainly dependent on the underlying financial product. For example, if you choose to take out an installment loan, you know that the amount you owe to the lender systematically decreases. This is not the case with a repayment-free loan and this has an almost direct influence on the level of interest. Since with an installment loan the outstanding debt falls, the interest that needs to be paid also falls. With a repayment-free loan, the original debt is not repaid, as a result of which the interest remains constant at the same level. It goes without saying that a repayment-free loan is therefore always more expensive than an ordinary loan on account of payment for obvious reasons.

There is no exact calculation

To conclude, we have to say that unfortunately we can not provide you with an exact calculation simply because it does not exist. The way in which financial institutions calculate their interest is often very complex and virtually impossible to trace. Especially when it comes to variable interest, calculating the cost of your loan in advance may not be completely redundant, but rather unreliable. Whether the interest will be higher or lower, you are almost certain that the total cost price can vary considerably at the end of the journey. If you use a fixed interest rate, you will have to start with the term of your loan and the percentage of costs charged by the bank or financial institution, but even then making an exact calculation without an automated program is very important. difficult to say but impossible. A good simulation or automated calculation can then perfectly help you.