When we want to finance a project, although our head is more concerned with the project than with financing, it is important to know what we are hiring. In order to get the best offers and hire them responsibly, it is important to compare at least three financing offers. In this way we will be able to know the conditions that each entity offers us and choose the one that best suits us. In order to carry out an effective loan comparison, we must take into account the following parameters:
Factors to consider when comparing credits
There are many factors that influence the price of a loan, therefore, there are many factors that we must take into account in order to compare effectively. The most important, among others, and those that will most affect the total cost of financing are the following:
- TIN: the interest on the credit, which tells us the price we will pay the bank for lending us the money. However, it will not always be the only thing that we will pay in a credit.
- Formalization fees: study and opening fees, the cost of which is between 1% and 3% of the requested money and which must be paid together with the first refund fee. These commissions will make the cost be between 100 and 300 dollars more for every 10,000 dollars.
- Links: one of the expenses that are least taken into account, but which are of vital importance, are the costs associated with the linked products. If we are required to take out insurance, a credit card or a payroll account, these will have annual costs that we must include in the calculation of the total.
- APR: finally, and not least, it is vital to look at APR. This percentage includes both the interest (TIN) of the loan, as well as other associated costs such as commissions and certain links. The average APR for consumer loans is 7.56%. Any loan with a lower APR will be considered a good offer.
All this information must appear clearly in the contract or in the personalized offer that the entity gives us in accordance with Law 16/2011, of June 24, on consumer credit contracts. If not, it is best to require the bank to provide it to us.
For easy comparison, better calculate each case
Although taking into account all the factors mentioned above is a good way to start comparing offers and know where to go, it is not the best way to compare between several personal loans.
The best way to compare between two or more financing offers is by simulating the loan that we want to contract. This is because the costs, fees and total vary according to the term and the amount that we request, how we negotiate or the purpose for which we want the money. What’s more, many entities directly include a loan simulator so that all this data can be taken into account at the same time.
The total cost of credit will be the fastest, most objective and most effective way of comparing the offer of credit that will be the cheapest.