A low-rate loan has the advantage that your own budget is not overburdened during the term. How high the rates are depends on two factors: loan size and duration.
That’s how cheap a loan can be
In order to obtain low rates, either a lower loan amount or a longer term should be chosen. The difference between these two options is particularly noticeable in the cost of capital. Lower sums also mean lower interest rates, while longer maturities mean higher interest expenses overall.
So if you are looking for a low-rate loan, you should first calculate exactly what costs will be incurred by the applicant. The most important comparison feature is the effective interest rate. In contrast to the borrowing rate, on the basis of which the effective interest rate is calculated, in the latter case all cost-relevant factors are taken into account.
This applies, for example, payout on larger loans, processing fees and even the term.
The longer the term lasts, the higher the effective interest rate. This also applies if the present offer advertises a fixed interest rate. The fixed interest rate is almost always based on the borrowing rate. In the end, however, this still has the advantage that the rates do not change over the entire term and thus provide a good basis for calculation, which affects your own budget planning.
But particularly low rates also offer call-off loans. With this loan, which is very similar to the collection, only a small percentage of 2% to 3% has to be repaid monthly. The interest rates are usually just above the level of installment loans, but well below the interest rates of normal discretionary loans. The call-off loan may be used in full or in part once requested. Therefore, in terms of cost and flexibility, they offer a good balance between discretionary and installment credit and, at the same time, a loan with low installments.