Accessing Low Interest Loan (Lån Lav Rente)
Human needs and wants are mostly insatiable but the sad thing is that human income is not limitless. There will be times when the resources to meet some needs will not be available. This oftentimes leaves one with no other option than to take out a loan.
The most popular forms of loans that are readily available for both short term and long term are consumer loans. These loans are either backed by collateral or they are not. Those backed by collateral are the ones where the borrower has to put down asset of equal or higher value than the amount they want to borrow.
Consumer loans come in different forms and they include personal, auto, student, medical, credit card and mortgage loans. These credit facilities have different terms and conditions but one thing that is common to them all is that they all come with interest.
What Is Interest Rate?
This is a percentage charged by the lender on the original sumthat is given out in a credit facility. Most often it is calculated annually and known as Annual Percentage Rate (APR). This charge can also apply to what is accrued on a savings account or CDs (Certificate of Deposits). In this case the interest is calculated as Annual Percentage Yield (APY).
These rates vary from loan to loan and from lender to lender. It determines what the total cost of a loan will be. So a loan of the same amount can either be cheap or expensive based on the interest rate it comes with. It can either be a simple or compound interest.
Simple interest is calculated as principal X interest rate X time. Let’s explain with this example:-
If a borrower takes out a loan of NOK300,000 with a 12 month repayment duration at 4% simple interest; it means they’ll have to repay as follows:- NOK 300,000 x 4% x 12 = NOK312,000. Note that interest rate is calculated annually.
If the loan comes with 30 year repayment duration, it will be: – NOK300, 000 x 4% x 30 = NOK360, 000
Compound interest is usually applied to the principal (that is the original amount) and the accumulated interest. This is actually more complicated than the simple interest.
There are other facets to interest rates and other fees that come with different types of loans. This is the major reason why you need to know all about the interest rate of any credit facility you want to apply for. It will help you know whether the loan is worth it or not.
How to Access Low Interest Loan
Since we have seen that cost of a debt is determined by the rates and fees, it then means that borrowers should try as much as possible to get credit facility with low interest rate. Below are some tips on how to get ‘cheap’ loans or options with the laveste rente (lowest interest rate) possible:-
Apply With a Co-signer
This is the situation where two people apply for a loan as one entity. The bank sees them as co-borrowers and every check that’s carried out on them is considered as one result. So for example, a person with a poor credit score can apply with one whose credit score is high; the overall score in the eye of the lender will be an average of both scores which will definitely be better than that of only one applicant with a poor credit score.
This makes lending you money less risky for the bank and you stand the chance of having your loan request approved for a higher amount than if you were applying alone. Additionally, you stand a greater chance of getting a lower interest rate.
Bear in mind that the two people involved in this co-signer arrangement have equal responsibility to pay back the credit advance. This means that you do not enter into the arrangement with someone you don’t trust because if the person absconds, you will be held liable for the loan.
Apply With Many Lenders
Do not put your eggs in one basket; cast your net wide so that you can have a lot of options to compare. This will give you a higher chance of getting the lowest and best offer for you.
Although you can sieve through available options by yourself, using an agent can save you a lot of stress, time and even money. In Norway, there are over 30 banks that offer loans that don’t require collateral. Imagine having to sift through these banks to get the best option for you.
With loan agents however, you can cut the process short and get your loan faster and at a desirable rate.
Consider the Loan Amount
It seems counterintuitive to apply for a large sum of money but the truth is that the higher the amount applied for, the lower your rates will be. This is because charging low rates on a small loan is not really profitable for the bank/lender.
While you may not save money on a fresh loan, this theory might serve you well with a refinance loan. Another instance in which a higher amount will fetch you lower interest rate is when you apply with a co-signer.
Consider Applying With Collateral
Collaterals are security for loans extended to consumers. They help to mitigate the risk that lenders take when they give out loans. For this reason, consumers who present collateral stand a better chance of getting lower rates.
The size of the loan will depend on the value of the collateral and the loan-to-value ratio; so the higher the value of the security, the higher the amount a borrower can get. This applies most often to mortgages.
Consumer loans are financial products offered by banks and other financial institutions to help consumers offset emergency bills. Though these products are life savers, one can also get caught up in a web of debts if care is not taken.
That is why we have shared some tips on how to get low interest rate loans. You will do well to bear these tips in mind so that you can make the best of whatever option you choose.