When we apply for personal loans our goal is to get the best financing at the lowest price . After having compared and chosen the cheapest credit that best suits our situation we can find a small detail that practically nobody takes into account and that will make our financing more expensive without us knowing.
The importance of terms in personal loans
When we are choosing between the different personal loans we look at the APR, the commissions that can be charged to us, the speed with which they will grant us the financing, the requirements and the linked products. However, we must also take into account the term that we will choose to reimburse the credit since the longer the term, the more interest we will pay at the end.
The following table shows the final cost of a personal loan of € 10,000 at 7.18% APR depending on the time it takes to repay it:
|Quantity||TAE||Term||Monthly fee||Total to pay|
|€ 10,000||7.18%||12 months (1 year)||€ 886.10||€ 10,393|
|€ 10,000||7.18%||24 months (2 years)||€ 448.54||€ 10,765|
|€ 10,000||7.18%||36 months (3 years)||€ 309.59||€ 11,145|
|€ 10,000||7.18%||48 months (4 years)||€ 240.30||€ 11,534|
|€ 10,000||7.18%||60 months (5 years)||€ 198.86||€ 11,932|
|€ 10,000||7.18%||72 months (6 years)||€ 171.36||€ 12,338|
The difference between fully repaying our loan between 1 and 7 years will be € 1,945 and the figure will continue to rise if we decide to extend the term. Not everyone can afford to pay almost € 900 per month to return our credit in a year, so the best alternative is to choose a monthly payment that we can afford to return in the shortest possible time .
Pay the personal loan with early repayment
If we are already paying our personal loan and we believe that we can pay a higher monthly payment to reduce the pending term, we can renegotiate with our entity.
Another way to end up paying less will be to make an early amortization , this is the total refund in a single payment of the capital that we need to return. Many entities charge a “fine” to return our credit ahead of time , usually 1% if the term is greater than one year and 0.5% if the term is shorter. Many other entities offer personal loans with free early repayment , so returning the credit early would be free.
Personal loans with free early amortization
These are two personal loans that offer free early amortization, they have no commissions and your request is made 100% through the Internet.
|Orange Loan ING Direct||7.18%||17 years||
|Cofidis Project Credit||From 5.06%||16 years||
In conclusion, the higher the amount requested in a loan, the higher the interest , so we must find the balance between monthly payments that allow us to continue with our daily expenses and a term that is the minimum possible to pay less interest and if we can collect the capital that we need to finish repaying the loan, opting for early repayment.