When applying for funding, whatever the purpose we want to give, we compare and invest a large amount of time to find the best personal loan offers . Thanks to the “war of credits” that currently exists between the different financial entities, finding cheap loans is relatively easy , but regardless of the offer, there are some tricks that can help us save interest.
The first thing we have to take into account when paying less interest on our loans is to find the financing offer that best suits our needs . For this it is important to know how much money we want to request, the repayment period that best suits us, the flexibility we want to have available and the speed with which we need financing. Next, the best current personal loan offers:
Knowing how to analyze our economic needs is one of the key points not to overspend . Knowing the right budget we need and not asking for more funding or waiting and saving a little more, for example, will help us pay less interest since interest will be generated on less capital.
The keys to not overpay for our credits
Once we have compared and chosen the cheapest personal loan that best suits our needs we can apply these simple tricks to save on the interest of the financing we are going to hire:
1.- Amortize whenever we can:
Amortize is to reimburse part or all of the credit before the agreed return period ends. In the case of finding ourselves with extra liquidity we can always amortize the loans since if we return the capital before time, the interests will be lower.
Some loans charge a commission for performing these amortizations (between 0.5% and 1%) in these cases we must calculate which of the two options will be the cheapest if you pay the commission and return the credit ahead of time or finish repaying the credit in the determined term.
In the event that we carry out a partial amortization, we will have two options: (1) have a smaller installment during the same repayment period or (2) remain with the same installments and shorten the repayment period . The second option will be the one that saves us more interest.
2.- The term matters
Although it seems a not so influential factor is one of the most can save us. The longer the repayment period, the more interest will be generated and therefore, although smaller installments are more comfortable, we must choose the shortest possible term as long as these monthly payments do not exceed 35% of our income , that is, if we charge € 1,000 net per month, the loan installments must not exceed € 350 per month.
To see easily and conveniently how much the term affects the interest savings, in the following table we can see how many interests will generate the same credit of € 10,000 to 7% during different amortization periods:
|Quantity||Interests||Term||Monthly fee||Total to pay||Generated interests|
|€ 10,000||7%||24 months||€ 448||€ 10,745||€ 745|
|€ 10,000||7%||36 months||€ 308||€ 11,115||€ 1,115|
|€ 10,000||7%||48 months||€ 239||€ 11,494||€ 1,494|
As we can see, the difference between repaying a loan in 2 years or in 4 years means a saving of € 750, a difference that will increase if the amount or term increase . We must bear in mind that we can not all afford to pay almost € 450 a month to repay our loans, but we should always try to choose the shortest time within our economic possibilities.
3.- Take advantage of the links
Last but not least, we must take advantage of the links offered by the credits. Although the links are seen as something negative, we can take advantage of them.
There are many loans that currently offer the hiring of products linked optionally in exchange for discounts on interest on loans . This can mean an important saving, but we must take into account the additional cost that these linked products suppose since, although this cost does not appear in the APR, it will indirectly affect the total cost of the credit.
In the case of optional linkages such as the direct debit of a payroll or receipts, where the associated accounts have no costs , we should hire them in exchange for a reduction in the cost of our financing. On the other hand, if these products have associated costs such as contracting insurance or the minimum use of a credit card, we must calculate which of the two options is the cheapest before linking or not.
With these simple tips we make sure to choose the loans that best suit us so as not to overpay for the financing we request. Analyzing our economic situation and our financing needs before hiring any type of loan assures us that we will obtain a fair price for the money we request.