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How big is the difference in cost of a loan depending on size?

I was thinking here to try to show a little about how big the differences can actually be for borrowing of different sizes. What I am talking about in the first place is the cost per month.

One thing to always keep in mind is that it is often difficult to know in advance what interest rate you will receive when it comes to private loans.

This is when the lenders usually talk about an interval within which the interest rate will be within which it is ultimately determined depending on the desired loan and who wants to borrow.

A few lenders offer smaller private loans

A few lenders offer smaller private loans

That have a fixed interest rate in advance. Therefore, when I first count here, I intend to use the example interest rate this loan intermediary has used. They have calculated 17.9%, which may be a bit high for some private loans.

If you borrow with this interest rate USD 400,000 for 15 years (which is probably Bank Norwegian) and with this interest rate, the total monthly cost for the first month would be as much as USD 8,160, where interest accounts for about USD 5,960. This is then calculated with straight amortization which is cheaper in the long run.

The total interest cost would be USD 539,681 during the entire loan period, which is very much actual, which corresponds to quite exactly USD 3,000 on average per month. Then of course amortization is added on this sum.

Now we must remember

bank

That this is the example interest rate they used and it is probably clearly more justifiable for loans of USD 50,000 or something like that. One with the same interest rate and taken in 4 years would cost USD 18,260 in total, which would be USD 380 per month. It is still a fairly high sum we are talking about but it is clearly manageable.

The important thing is that you who borrow money are aware of what it really costs to borrow. This loan of USD 50,000 means that in the next few years you will pay out USD 68,260 in amortization and interest.

If you look at a slightly more realistic USD 400,000 loan, the figures can probably be a little better iaf. At the moment, only Bank Norwegian is offering this amount to its borrowers and they have the lowest interest rate 4.99%.

To add a little extra to that we therefore say 7%, which is quite a lot less than the almost 18% that I counted on before. The cost will instead be a total of USD 211 170 (more than USD 300 000 less in total), which is about USD 1,170 in interest expense eliminated per month.

Borrowing money is not cheap

Borrowing money is not cheap

And you should be aware of that. What you have to do is to set what you intend to do with the money in relation to what it costs and this is just something you can do yourself.

For example, I would probably think it was far too expensive to borrow money for a holiday in Norrland in the winter, but someone who likes snow and cold might think it would be worth it. It’s just that you really think about your decision before it is made.

Credit Redemption and Purchase Option Lease (LOA)

But what if you want to lower your monthly payments by buying a loan? A glance at credit union opportunities with a LOA.

 

The point on the lease with option to purchase

The point on the lease with option to purchase

Cars, real estate, smartphones, and even mattresses, rental with option to buy is spreading in many sectors and seduces more and more French. The Credit Guide announced last September that this type of credit had made a good over 35% since July 2016. Leasing, leasing, LOA, lease with option to purchase is known by several names, but is based on one principle. This is the rental of a product for a fixed period of time at the end of which the borrower may or may not proceed with the purchase of the property by paying the remaining sum (amount decided at the time of the implementation of the contract to which withdraws the monthly payments already made).

The goal is to be able to test the product for a certain period of time before buying it or enjoying a product that is always new. For example, the leasing of a car may be leased and at the end of the lease a new car rather than buying the car. Thus, we will always have in hand a new car. The long-term rental is therefore a credit during which you would be given the choice to change your mind after a certain period.

 

Lease with option to purchase and repurchase of credit

Lease with option to purchase and repurchase of credit

As we said above, the LOA is a real success, but as for a conventional credit, it can happen that we can not deal with the monthly payments. Since the contract requires a certain amount of commitment from the lessee, a credit redemption may be possible. It will obviously be necessary to study the feasibility of the project according to the terms of the lease, but ideally, the lease with option to buy can be included in a credit group. The idea will be to group all the credits that we would have subscribed (real estate, consumption, etc.) by including the leased contract. Thus, the monthly payments can be spread out over a longer period and renegotiate the rates of the other credits in order to reduce the amount of the sum paid each month.

 

Grant condition for a loan redemption with LOA

Grant condition for a loan redemption with LOA

Be careful anyway, whether you decide to make a credit redemption for the rental period, or for rental and purchase, you can not proceed to this type of operation until one year after the signature of the lease. What’s more, in both cases, you may be subject to sales penalties. So take the time to ask for a feasibility study for your project to find out if the timing is right and if the game is worth it.