Looking to buy a new car, do some renovations, or replace a household appliance? Taking out a personal loan is often a good solution to cover this expense . A personal loan, also known as a consumer loan, is a relatively simple loan to obtain.
Virtually all traditional and online banks, as well as specialized lending organizations, offer personal loan options. Here are some tips to find the cheapest personal loan on the market:
Consider a secured loan for your purchase if it’s for a very specific need. Secured loans generally offer a more attractive rate. However, they can only be used to purchase the property for which they’re being used (e.g., a car, a swimming pool, or renovations). You’ll need to provide invoices or a purchase order to release the funds.
If the purchase isn’t urgent, wait for the often regular sales (Christmas, vacations, back-to-school, etc.). Banks and credit institutions use personal loans as a loss leader.
Borrow small amounts , although unsecured personal loans can go up to €75,000. Rates are often more attractive for smaller amounts and shorter terms.
If you qualify, subsidized loans are a great way to get a good rate . These loans are supported by local governments or employers.
Offers vary greatly depending on the profile and the time of application (especially when taking into account promotions).
What are the points to look out for in a cheap personal loan offer?
As with any loan, it’s essential to compare the different terms and conditions of the cheap personal loan offer. The following points should be checked in particular:
The APR (annual percentage rate) includes the nominal loan rate, as well as additional fees. This overall rate has been imposed on financial institutions to facilitate comparisons.
Some banks offer these fees, others don’t, but they make up for it in the interest rate. By adding the total cost of the loan plus the application fee, one offer may be more attractive than another with no application fee but a higher interest rate. Application fees are generally around 1% of the loan amount.
Monthly payments should be reasonable within your budget. Sometimes it’s better to choose a higher rate or a longer term to achieve a more manageable payment. This is especially true if you have multiple loans in progress.
The total cost of credit corresponds to the total amount of interest you will pay to the bank. Low nominal rates may conceal a higher total cost, for example due to application fees or additional charges.
For example, a €1,000 loan at 10% will cost €55 if repaid over twelve months, but €108 if repaid over three years!