There are many factors to consider when applying for a loan, which can make it difficult to find the best loan. A good decision can be gold, as a loan agreement will determine your financial situation for years to come. To make things easier for you, we’ve collected the most common mistakes you can make when borrowing.
You do not look at all the offers in the market
This is one of the biggest mistakes you can make when choosing a loan. Seeing a good credit ad saying it is no better or having a friend have a contract doesn’t mean you can’t find a better deal on the market . Usually we would rather contact the bank we already know or have a bank account and not compare more offers, although we would probably find a better deal.
With a personal loan calculator, you can easily eliminate this mistake by listing several personal loan quotes at the same time for easy comparison. We can apply for a personal loan of up to HUF 10 million, including at Erste Bank, with a fixed installment, without guarantor or collateral. The HUF 10 million is also available at Budapest Bank, K&H, CIB and Sberbank.
You also take out a loan when there is another solution
Sometimes we also rely on credit in life situations when we do not need it. For example, if you are borrowing for a holiday or buying a product that will come in handy later . In these cases, the loan amount is low, up to a few hundred thousand forints, which you can save in a few months. If you want to read some helpful savings tips, we recommend this post.
You take out a personal loan instead of a mortgage
If you need millions of dollars to achieve your goals, a personal loan may not be the best solution . With Lear’s calculator, we looked at the terms on which we can raise $ 5 million for a 96-month term:
as a personal loan,
as a mortgage for free use,
as a home mortgage.
The result: Budapest Bank’s Qualified Consumer-Friendly Home Loan, at 4.73 percent APR, at a fixed rate throughout. The monthly repayment installment is HUF 62,606 and the total repayment amount is HUF 6,026,166. Budapest Bank also offers the best deal on free-to-use mortgages: the Equator Mortgage, which offers a 6.12 percent APR. In this case, the monthly repayment is HUF 69,179 and the total repayment is HUF 6,252,851. In the personal loans market, Sberbank is the winner: the APR is 7.57%, the monthly installment is HUF 68,317 and the total repayment amount is HUF 6,624,842.
We can see that a personal loan can cost up to HUF 600,000 more than the most favorable home loan. If your goal is not to buy a home, you can take out a mortgage for a few hundred thousand dollars more than a personal loan, even if you take into account the additional cost of a mortgage, which involves real estate collateral.
You can compare current home loan offers with the Lear home loan calculator.
You are not comparing bids based on interest rates but on interest rates
You can often hear in bank commercials that you can borrow at a low interest rate. However, you get a more accurate value by comparing your offers based on your APR, not your interest rate, which is your entire APR. The APR includes, in addition to interest , a number of costs that you also have to consider when borrowing (for example, a disbursement fee or an account management fee, and in the case of mortgage loans, valuation and land administration are among the items). Because of this , it can be misleading to look only at the interest rate , as the additional costs may vary from bank to bank, so you may not be the best at the bank with the lowest interest rate. Have a question about interest rates? Find the answer on Lear’s page.
You are choosing the wrong maturity
The term of maturity encompasses the repayment period of the loan, so it is important to think carefully about how long you will be paying the installment . It’s a tempting idea to get your credit down as soon as possible, but it’s even more important that you can pay off your monthly installment even if it comes with another major expense in the month. If you are looking for safety, you should choose a longer maturity and a lower repayment, so you can avoid unpleasant situations. In our glossary we will deal with repayment in a separate chapter.
You choose risky credit
Today, most freelance personal loans have a fixed interest rate, which means that the loan interest rate is fixed until the end of the term, meaning that the installment will remain the same. Various interest rate plans are still available at some banks, but we are cautioning that a potential interest rate hike could significantly increase the monthly repayment amount.
Mortgages also have a wide variety of floating rate and fixed rate schemes, but in this case, it is worthwhile to choose from safer loans . For many years, the MNB has been aiming to guide the population towards predictable and secure mortgages. You can find all the information about the dangers of variable rate loans in our Glossary.
You do not take into account the additional cost of the loan
When applying for a loan, you may incur costs that aren’t included in your total APR. These include contract modification fees, transfer fees, late payment interest, notary fees or early repayment costs. These are also worth comparing before you choose a bank as you can save up to tens of thousands of dollars with a good decision . If you would like to know more about credit costs, you can find all the information here.
You do not consider changing banks
Switching banks is easier than you think and can even be an advantage when applying for a loan . With Lear’s calculators, you can always see if you can get the best deal with or without a change of bank. If your loan application is not current for you, but you would like to pay less for banking, here is where you can compare the best available bank account packages.
You’re not looking for state aid
Before you commit to a bank loan for several years, it is worth checking if you are eligible for any state aid . If you’re young, having a baby loan or CSOK can help. The state also supports NOK members and those who make regular pension savings.
You are not viewing current promotions
Banks are constantly approaching customers with various promotions. Lear’s calculators help you find the best deal available at the moment . In our constantly updated database, we also indicate periodic promotions, and in our calculators we indicate separately if a bank is announcing a periodic or unique discount.
You do not read the contract carefully
Before you enter into a contract, the bank should be given enough time to read the contract – this is a good idea. A loan defines your financial situation for years, and you can save yourself from unpleasant situations if you are aware of the content of the contract – it would be embarrassing to realize later that you have put yourself in an awkward position with a thoughtless signature. A draft general contract can be downloaded from most banks’ websites , so you’ll know a lot before you start applying.