Are you also curious about where you can borrow money at the lowest interest rate? In this article we tell you how the interest on a loan is determined. We tell you from which lenders you can borrow at the lowest interest rate. And we give you tips to find the lowest interest yourself.
How is the interest on a loan determined?
To find out where you can borrow at the lowest interest rate, we first want to look at how the interest rate on a loan is determined. As you may know, the interest on a loan does not stand still, but fluctuates constantly. In addition, the interest rates of a revolving credit and a personal loan differ from each other. And then there is a difference in the interest rates that the lenders demand.
A lender determines the interest on a loan based on five factors: market value, loan amount, collateral, risk profile and life insurance. We go through the factors one by one with you.
The market interest rate
The market interest rate actually expresses the purchase price of money. It is the interest that lenders themselves have to pay on money. The higher the market interest rate, the more interest they will also pass on to you and me when we want to borrow money.
Medipor rates are often used as a benchmark for this market rate. These are rates at which 57 European banks grant each other loans. These rates are determined every day. If the Medipor rates rise, the market interest rate will also rise. What is then passed on in the interest on the loan for the consumer. Later in this article you can read more information about the Medipor interest rates.
Amount of the loan amount
In general we can say: the higher the loan amount, the lower the interest. The reason for this is that banks incur one-off handling costs for preparing a loan. If you conclude a substantial sum in one go, you only have to incur costs once for the entire amount. It does not matter how high or low the amount is, the handling costs are always the same. They consist of costs for a consultation and administrative costs.
Collateral or not
Suppose you borrow money for a house, then you can choose to use your house as collateral. This gives the bank more certainty than if you take out a loan without collateral. Interest rates on a personal loan are higher than the mortgage interest rate, for this reason.
The risk profile
When you apply for a loan, a risk profile is made of you. This risk profile answers questions about your age, income, current credit and your credit history. The data help the bank to make a statistical estimate of the chance that you can repay the loan in time and in full. The higher the risk for the bank that you cannot repay the loan, the higher the interest will be.
Whether or not a life insurance policy
The fact whether or not you have death insurance also plays a minor role in determining interest rates. You pay a slightly higher interest when you also take out a life insurance policy. If you die while you have not yet paid off the loan, it will be canceled.
The most important thing you can do to find a good and cheap loan is to compare the loans.
The most important thing you can do to find a good and cheap loan is to compare the loans. You cannot compare loans before you know which loan type you want to take out. You will also need to have an indication of the amount you want to borrow and the term at which you want to take out the interest (in the case of a personal loan). We will briefly present the most important details of a revolving credit and a personal loan.
The revolving credit is the most flexible loan form there is. You choose a maximum loan amount in consultation with the lender. You are then free at what time you withdraw or repay what amount. You can also withdraw the money that you have already repaid. You only pay interest on the money that you actually borrowed, not on the total loan amount. Extra repayments can always be free of fines.
The interest rate is variable with a revolving credit. This means that it can fall and rise during the period that you are paying off the loan. Because you can withdraw the money that you have repaid, it is impossible to say in advance when you will have exactly repaid the loan. The repayment of a revolving credit often takes a little longer than with a personal loan, because you can continue to withdraw money.
Where the revolving credit is very flexible, the personal loan provides security and stability. You know exactly where you stand before you take out the loan. The interest for a personal loan is fixed. In consultation with the lender, you determine the loan amount and the term in which you want to repay the loan. Amounts repaid cannot be withdrawn. In short, you know exactly what you will pay per month, an interest and repayment and when you have fully repaid.
Nowadays, it is also possible for most lenders to pay off an additional fine without penalty for a personal loan. Do you borrow the money for a renovation or improvement of your owner-occupied home? Then you can deduct the interest from the income tax.
Correct loan amount
Have you made a choice and do you know which loan type is most interesting for you? Then you can now estimate the amount that you want to borrow. If you are going to renovate your house, for example, try to estimate as precisely as possible how much this will cost. Borrowing too little is not pleasant, because you may have to take out an extra loan and that costs money. But borrowing too much is not the intention either, eventually that money, now plus interest, will also have to be repaid.
Now that you know which loan you want to take out and which loan amount you want to borrow, we can start comparing the loans. Make sure that you view the interest rates for each loan for the same term and the same loan amount. Also always check the conditions that apply to a loan. Perhaps the conditions in your case are not favorable and you prefer to opt for another loan. Can you pay additional penalty-free extra with this lender? And what happens to the residual debt when you die while the loan has not been fully repaid?
Find the lowest interest rate: 3 tips!
Tip 1: Choose the correct loan form
The interest that you pay depends on the type of loan you choose. Make sure that the interest of a personal loan is fixed and that of a revolving credit is variable.
Tip 2: Choose the correct loan amount
The amount of the loan often influences the interest that you pay on the loan. The higher the loan amount, the lower the interest. As we indicated earlier, this is because the administration costs and consultancy costs for taking out each loan are the same. If you borrow a lower amount, the costs will weigh more heavily in the interest. Don’t be fooled by low interest rates with a high loan amount. Ultimately, the entire loan amount must also be repaid. If you borrow a larger amount, the term will probably be longer and you will be paying longer and paying interest.
Tip 3: Report collateral
There are lenders who give a discount when you indicate that you have collateral. If you are the owner of a home, then your home can serve as collateral for the bank. This discount can have consequences. For example, you may not be able to move without first asking permission from the lender. Are you planning to use your house as collateral and receive a discount? First check what the conditions are.
Interest rate revolving credit
We compare the current interest rates for a revolving credit. If you opt for this loan form, you are dealing with variable interest. This can both rise and fall during the term of the loan. Below you can see the highest and lowest interest rates per lender. The amount of interest that you have to pay depends on a number of factors. We look at the level of your income, your age, type of employment, housing situation, existing loans and past loan.
Interest rates personal loan
We also compare the current interest rates of a personal loan. When you choose a personal loan, you know that the interest rate will remain the same during the term of the loan, as this is fixed. The table below shows the highest and lowest interest rates per lender. The amount of interest that you have to pay depends on a number of factors. We look at the level of your income, your age, type of employment, housing situation, existing loans and past loan.
Medipor interest rates
Before we talk about Medipor interest rates, we first explain to you what the abbreviation Medipor stands for. Medipor stands for: EuroBanker Offered Rate. The Medipor has existed since 1999. It is the interest rate at which a large number of European banks grant each other loans to each other. Every morning from Monday to Friday, at 11.00 am CET, the Medipor interest rate is announced for at least five maturities. All participating parties are informed. The press will then also be informed of the new interest rates.
The economic conditions such as growth or contraction of the economy and the level of inflation influence the level of the Medipor interest rates. The Medipor is also used to set interest rates for mortgages and savings accounts.