Analyzing interest rates and other costs involved in the operation is essential before taking out credit. Learn how to choose the best alternative for your pocket.
Want to know Best bank has the lowest interest rate for a loan? So you are in the right place. Here you will learn how to set interest rates, the rates by type of credit and how to find the lowest interest rates.
The interest rate is certainly one of the main concerns of those seeking credit in the market. This is because the fees practiced by different financial institutions can cause the final loan amount to vary significantly.
Understand, below, how to compare interest rates from different lenders and learn how to choose the option that best fits your budget.
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Learn what sets interest rates on a loan
The factors that interfere in the definition of the loan interest rate range from the economic situation to the credit policy adopted by the financial institution.
To compose the interest rate, the financial agent adds three values: the customer acquisition cost, the investor’s rate of return, and the sale cost. Within this calculation, institutions also consider other factors, such as credit risk or default.
In addition, other points interfere with the definition of interest rates and loan costs, such as:
Selic Rate, One of the variables that can affect this cost is the Selic rate. The economy’s base rate is used to determine interest rates charged on loans of any nature, including the interest rate on loans.
The country’s economic situation, such as the increase or decrease in inflation, directly impacts the definition of the rate. Loans, investments, consumption, and even the dollar exchange rate, are affected by variations in the Selic rate.
CET – Total Effective Cost
Although it does not impact the interest rate, those who intend to take out credit need to know that other costs are involved in the operation. Other fees, insurance, and charges may also make up the total loan amount, and the sum of all this is called the Total Effective Cost (CET).
Paying attention to the CET is important because, when comparing credit offers from two financial institutions, the one with the lowest interest rate may not be the most advantageous for the consumer considering all the other costs involved.
In addition, it is important to know that operations involving the acquisition of goods and services must contain this total in advertising reports when specific offers are published. Pay attention to the “fine print” so that no information goes unnoticed.
To prevent the CET from being disguised in financing, the Central Bank created a rule that obliges financial institutions to disclose the Total Effective Cost highlighted in all contracts.
As you saw above, several factors can contribute to defining the interest rate on loans.
Interest rate by type of loan
After understanding what impacts the interest rate setting, you now need to understand the differences between credit lines.
For this, the initial step is to understand these different types of credit. This is important because you will only find the one that best meets your needs.
To get an idea of the differences between them, the overdraft and revolving credit card rates are among the highest in the market and even exceed three digits a year.
On the other hand, modalities such as secured loan and payroll loan have much more attractive rates. This happens because these modalities present a lower risk of default, and the companies that offer them can reduce interest rates. By the way, this rule is valid for any financial institution.
A wrong credit take can have a very negative impact on your financial life. For comparison purposes, see the average value of the main interest rates:
What is the interest rate on a secured home loan?
A loan with a property guarantee, or home equity, as it is also known, is one of the healthiest types of credit on the market. It offers low interest rates, as the customer puts a property as collateral for debt payment, lowering the risk of default.
The prerequisite for this line of credit is that the property has regular documentation and meets the determinations imposed by the institution that will grant the loan, such as being in a regular territory and in good condition.
In general, the amount to be borrowed can be up to 60% of the property’s value. To give you an idea, the average rate for Creditas’ property-secured loan starts at 0.99% per month .