We must say that we are delighted that there are as many different loan options as there are today. Whether you want to borrow for housing, travel or a new car, there are opportunities for you. If you borrow money, it costs, but just how much it costs may not be as easy to answer.
Today it is possible to find cheap loans with low interest rates. Let’s take a look together so you can have better control over your loan and your finances.
What is interest and what interest rates are there?
Whether you take out a mortgage loan , peer-to-peer loan or a mortgage loan, you will have to pay interest. The interest rate is a fixed or variable percentage unit that is placed on the amount you borrow. It can be seen as a fee for you that you pay to the lender as compensation for your borrowing.
The interest rate that you personally will receive depends on several factors.
Factors that affect your interest rate include:
- Your income
- Your expenses
- Any debt
- Possible payment remarks
By law, all lenders must take as close control of your finances as possible before they can possibly grant a loan. This control is largely done via a so-called credit report. However, today’s financial data may not be visible on credit information. The result of the credit report is what will determine how much you can borrow and at what interest rate. What are the different interest rates in Sweden today? There are many!
Some examples of interest rates are:
- ANNUAL PERCENTAGE RATE
- Fixed interest rate
- Variable interest rate
- Loan interest rate
- monthly rate
How do I calculate my interest rate?
Since we cannot know your amount, repayment period, interest rate or what type of interest you have received, we can give examples. Then you can sit down in peace and quiet and try to figure out your interest rate.
Fixed interest rate:
Remaining debt x interest rate in decimals = annual interest rate in USD
Let’s say you borrow $100,000 with 7% interest annually, then you get: 100,000 x 0.07 = $7,000
If you want to calculate monthly cost in interest you only divide $7000/12 months = $583.33
NOTE! Note the concept of “outstanding debt”. For each year it decreases, so does the annual interest cost.
Variable interest rate:
If you have a variable interest rate, you need to keep a watchful eye, as it will change for you. Many banks offer so-called “3-month interest rates” as the shortest term. For you, this means that the interest rate changes every three months. In other words, it is very difficult to calculate in advance.
Effective interest rate:
To give you as clear an answer as possible, we have a very good article on this particular topic. Here you will find how to calculate effective interest rates.
What is the payback time?
The repayment period (maturity) determines how much you will need to repay/repay each month for your loan.
A longer repayment period means higher interest costs in the long run and a lower repayment cost – a shorter repayment period means lower interest costs in the long term and a higher repayment period.
It is important to know the repayment period because your payments will affect the “remaining debt”.
This is important in order to plan your payments on time, but also to see how the costs change for each payment that is made or not.
Lower the interest rate on your loan
Most of the factors affecting the interest rate on a loan cannot be affected as a borrower.
After all, it is not easy to raise real and fast wages. However, there is one thing you can do to get better interest rates and that is to apply for a loan with someone else. When you apply for loans with co-applicants, you both have joint responsibility for repayment.
Then you reduce the lender’s risk and they can offer lower interest rates. Similarly, you can get lower interest rates if someone else is willing to bail you, or if you can use an expensive item such as your car or other as collateral for the loan.
Another interest rate
When you save money on a savings account, you usually receive payment of interest once a year. So you get interest here, instead of paying interest.
When this interest rate is added to the savings capital, your savings capital grows.
This is also called cumulative interest or compound interest.
Some savings accounts add interest to the account several times a year, which means that you get interest on the interest earlier and thus better return, if you leave the interest on the account.
In this case, your effective interest rate will be higher than the annual interest rate. When the interest rate is only paid once a year, the effective interest rate will be the same as the annual interest rate. You can also get interest on the interest on fund or share savings if you reinvest dividends directly.