How to choose a good financing? – Loans

The current continuing economic crisis is bringing more and more  people to address the request for funding when we have to deal with particularly expensive unexpected expenses. In order not to be repented later, it is good to avoid making hasty choices.

Consolidate loans

Consolidate loans

Not always when we are requesting a loan or comparing different loan possibilities, we can easily understand what is the best choice for our interests. Every quote is characterized by the presence of many data and variables that must all be taken into consideration to define the optimal choice, such as for example the installment, the preliminary costs, the Annual Nominal Rate and the Annual Global Effective Rate as well as the accessory charges. Each of these variants may be different and it is necessary to evaluate them carefully to be able to understand which is the best financing for our particular case.

In addition, many doubts come to mind when requesting a loan: how much money we can get and how, whether it is necessary to mortgage our properties or not, if it is possible to consolidate debts or not, and others.

The best way to make a choice is to rely on serious professional advice that can let us know the points in favor and those against the various possible funding.

Pay off loan

Pay off loan

What we need to consider first and foremost is: the amount of money we need, the maximum amount of our income we can use to return it and the time limit within which we think we need to pay off the loan. Once these key factors have been defined, we must evaluate those funds that can be implemented according to our work situation (autonomous, dependent, retired, etc.) and identify the “eligible candidates”.

The questions that must be asked are: how much money do we need? How quickly should we repay it? How much are we willing to spend more to repay it? What kind of financing does this do for us?

It is also mandatory to check the other elements of assessment and  combine them together to identify the best choice.

The annual nominal interest rate ( TAN ) that credit institutions use to fix the monthly installment installment. The lower the TAN, the more convenient the installment will become.

Incidental expenses must be assessed separately because these costs are not included in the TAN: very high incidental expenses can cancel and make even a loan with a lower TAN lower than others.

For this reason, the best rate for an overall valuation is instead the APR, that is the Annual Global Effective Rate. The APR also includes ancillary expenses, the most important of which are: preliminary, management and collection fees, stamp duties or replacement on the contract, cost of periodic communications, costs for closing the case and cost of any insurance if present.

Therefore, the APR is the synthetic reference index for a quick analysis, it being understood that it is good to individually check all the items of expenditure and the proposed repayment methods.

The insurance cost is not always mandatory, but it can also be  optional. However, remember that it is good to evaluate an insurance, because it protects you from insolvency risks in the presence of unforeseeable negative events.

We must also take into account the duration : the more a loan is “spread” over several years, the more we will see the chances that it will be accepted by the creditor institution increase and we will have lower installments. A bank does not grant loans to anyone, but assesses the ability to repay the loan of each person who requests it. The standard way in which you make this assessment is by checking that each installment does not exceed 30% of your monthly income, a calculation that can easily be done in advance.

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