Borrowing money is not free. Banks and credit companies charge an interest rate on the loan as a fee and thereafter additional administrative costs are added. Cheap loans are what everyone strives for, but what is considered a cheap loan and how do you find them?
This article will explain what cheap loans mean, what you can do to find them, as well as what guidelines you can follow to improve your chances when applying for loans.
What types of loans are the cheapest?
There are many different types of loans that suit different purposes. Private loans, SMS loans, car loans, building loans and member loans are some of these. To get the lowest interest rate on your loan, regardless of the type, the same guidelines can be followed, which we will explain a little later. First, however, let’s look at the types of loans that are the most advantageous by default.
With a student loan you can get help to cover the cost of living and food if you study in another place or another country, for example. At a college or university, you can at most take out a loan for 240 weeks, which means six years of study. The total amount for the loan is currently SEK 1820 per week, which corresponds to approximately SEK 7300 per month. In addition, there is also a so-called study aid, which does not have to be repaid. This is a grant given to all students.
When we talk about cheap loans it is very advantageous. At present, the interest rate is only 0.16% of the loan amount, making this the cheapest loan on the market with a good margin. Because of this, taking a student loan is very common, especially since the installment period is also very long – up to 25 years.
A mortgage is another type of cheap loan where you bind your home as a collateral for the lender in case you cannot pay off the loan. Your villa can cover a maximum of 85% of the loan’s total cost. You pay the remaining part with a cash deposit. If you cannot repay the loan, you may have to sell your home, as stated in the agreement. Mortgages usually have a low interest rate and a long repayment period, but they can be difficult to take out. They have high setup fees, which means that mortgages are only suitable if the loan is of a large amount of money.
If the mortgage is 70% higher than the market value of your home, you can repay two percent a year. Private individuals who in turn take mortgages that are 4.5 times higher than their annual income may repay one percent. If you instead have a mortgage that is lower than 70% of the market value of the home, but still above 50%, one percent is repaid annually.
What loans should I avoid?
It is important to re-emphasize that a loan is always a loss transaction, given the interest rate. That said, there are obviously loans that are better than others. What are the loans you should definitely avoid?
These loans can also be called sms loans and are the opposite of cheap loans. The money is transferred to your account very quickly, but you are also expected to repay the loan at short notice. Most often, the loan amounts are between SEK 500-10,000 and the interest rates on these small loans are very high. It is common for the interest rate to be between 30-40%, making these types of loans the most expensive. However, the advantages are that it is quick, easy and easy to take a quick loan. The requirements are also very low. Don’t let that tempt you though – if you want cheap loans there are better options than these.