What we have already said about receiving a certain amount of cash from the bank does not mean that we will have to give back the same amount. What’s more, when concluding a loan agreement, we should be fully aware that we have to pay more than the bank gave us. The amount we will have to pay depends on the bank. Before joining the loan agreement, it is worth getting acquainted with the offers of several different banks to select the most advantageous offer. In addition to the amount of the loan that we must pay off, the interest rate on the loan must also be added. In each bank, it may be different. The only fixed amount is the maximum interest rate, which is regulated by law and can not be higher than the law provides. In addition, we also bear other costs, which we often do not even realize.
TOTAL LOAN OF THE CREDIT
There are several things on the total loan amount.
AMOUNT OF CREDIT
Our loan agreement is worth €5,000. It means no more that we owe the bank €5,000. This is the amount of our loan, which we have to return according to the repayment schedule. And if it would end perfectly. However, in this case, the bank would not earn anything if it sells its products. The bank as a salesperson also wants to make money. Therefore, it should be remembered that in addition to the loan amount, we also incur other costs related to the loan on our side. In this situation, the loan amount is a big part that we have to give back, but not the only one.
The total loan amount also includes the amount of interest on the loan. The legislator only sets the upper limit of the loan interest rate in the form of a law. The bank must therefore fit in this range. In addition, the interest rate depends on the bank. What is more, the interest rate is determined individually, depending on the type of loan and its amount. Still, it is not everything.
Another cost of the loan is the cost of its service by the bank. Here, unlike the maximum interest rate, the Act does not regulate the maximum amount that the bank can set for servicing the loan. We charge a fee for the fact that the bank provides us with cash. The cost of servicing a loan is, for example, a preparation fee or a loan commission.
Credit insurance is a security for the bank, but above all, collateral for the borrower. In the case of an unexpected loss of income due to credit insurance, we can, for example, postpone the payment of installments. However, this is another loan cost that the borrower must incur.
These are the basic costs that apply to most loans. Depending on the amount and type of loan, there may also be other costs such as a notary or an entry in the land and mortgage register.