The number of banks and financial service providers offering loans is increasing day by day. When searching for loans on the Internet, you quickly get the impression that the offer is almost unmanageable. It is correspondingly difficult to differentiate between reputable and reputable providers.
Composition of costs
The main cost to the borrower comes from loan interest and processing fees. Due to the enormous range of online loans, which are mostly installment loans, you can usually get a loan without any processing costs from any reputable provider. This is mainly due to the fact that the work processes of lending to online financial service providers have been optimized and standardized due to the elimination of expensive branches and cost-intensive consultations.
A loan without processing costs is particularly interesting for those customers who need a relatively high loan amount, because the processing fees are normally calculated on the basis of the loan amount. Accordingly, the higher the loan amount, the higher the processing costs.
Beware of hidden costs
Even if financial service providers advertise a loan with no processing costs, you should make sure that they do not simply transfer the processing fees to a certain extent. This can be determined relatively quickly by looking at the interest rates. A basic distinction is made between two interest rates: the annual percentage rate and the nominal borrowing rate; where the annual percentage rate is the sum of the nominal interest and all processing costs.
If a bank advertises a loan without processing costs, the nominal borrowing rate and the annual percentage rate must be almost identical. Slight deviations from both values can only result from the repayment mode, i.e. in particular with monthly installments. However, the difference between the two values should never exceed 0.1 percent of the loan amount.
Another way to safely expose such practices is to compare different loan offers and financial service providers. For this purpose, for example, an online loan comparison using a loan calculator is useful. In addition, a comparison of the various offers makes sense anyway in order to probe the cheapest offer from a loan.
The problem with a loan without processing costs is often the fact that free special repayments, for example to repay the loan before the deadline, are usually not permitted. Many banks try to prevent interest rate losses by working in this way.