With the current trend of expenses, it is hard to go by with just your hard earned cash and loans usually do much than what we have. However, since it is something we borrowed; additional amounts are usually piled to its principal.
Despite the competition of lending companies, nobody gives in to a huge difference of interest from others, companies usually have the same or with just a few differences on interest rates. People loan with a hope of saving themselves from zero amount, however, with higher rates it seems that they lost more than they gained.
One of the common questions some asks about loans is, do cheap loans really exist?
Determining A Cheap Loan
In order to know if the loan is the best option, you need to see and compare it with other companies; you wouldn’t know how small it is if you don’t even have an idea of how big “big” is. Though there are companies who offers lesser rates than others it is still best that you study their agreement. Often times, lower rates may require you a shorter period of time to repay the debt, or in some cases companies would not allow for extension and may impose strict acquisition of the collateral.
Cheap Loans May Not Be As It Seems
You should know the difference between a compound interest and simple interest. A company may post a low rate but with a compound interest and another company with a higher rate but with a simple interest rate. A compound interest is calculated by adding the principal value plus the accumulated interest from past period adding the present interest of the present period. A simple interest however is calculated by adding the principal and the agreed interest.
If you are to choose between a low rate with compound interest and a higher rate with simple interest, you should do simple calculations first to determine which of the two is really cheaper. Low rate does not necessarily mean cheap, if it has monthly interest piling up, you might get yourself an expensive deal.
Look For Good Deals First
Instead of just settling for the lowest rate, you should first look for a good rate with the best term. A cheap loan does not necessarily imply an almost zero interest because that is an ultimate impossible. Just like you, lender ventures into such business to earn; giving you more and less for them is not really something they do to survive.
Most companies compensate for the low rate with lesser time for payback but with higher surcharge. If you want to have a good deal, find companies or lender that has a simple interest term. If you are opt to pay your debt monthly, find those who would only charge you with the remaining balance plus the interest, not the principal plus the incurred interest for the failed periods.
Low rates may often be a cover-up for expensive propaganda, cheap loans is not dependable on low rates; look for good payback duration and simple interest terms to have a good deal.