Are you considering taking personal credit for the first time? For a new borrower, the field of private lending can sometimes be scary, especially in terms of costs. What are the costs of a future loan? What should he watch out for before committing? Our explanations.
Personal credit: a flexible solution adaptable to your needs.
Whether it’s to supplement the amount necessary to carry out a project, to cover unforeseen expenses or to please your family, a private can will help you get the amount you need. Indeed, with amounts from 3,000 dollars and reimbursement over 12 to 60, or even 72 even 84 months, the terms of a personal loan are in principle very flexible.
For new borrowers, the question of actual cost can sometimes be confusing. Between depreciation, interest payable, and other costs, we offer some explanations to help you find your way.
Amortization, interest, monthly bill.
Amortization of a loan is simply a repayment of the amount borrowed. For a credit of 10,000 dollars, the amortization will be exactly 10,000 dollars.
Interest ultimately represents the “cost” of the loan. It is used, among other things, to cover administrative costs, which are never invoiced “in addition”. The interest to be paid depends on the interest rate charged, but also on the duration of repayment: a longer duration entails a higher cost. As an indication, a loan of 10,000 dollars over 24 months leads to a total interest of 813 dollars. The borrower therefore reimburses a total of 10,813 dollars.
Finally, you should know that in the context of a private loan, amortization and interest are directly included in a fixed monthly invoice. Using the previous example, the borrower will pay a single invoice of $ 450.50 each month without having to worry about how much is allocated for depreciation or interest.
Some examples of costs
Mr and Mrs Palmond wish to buy a used car at a cost of 8’000 dollars. In order to supplement their savings, they decide on a private loan of 5,000 dollars over 12 months. With a rate of 7.9%:
- The total interest is 167.-
- The monthly cost (interest and amortization) is 180.-
Mr Rubois decides to finance the installation of a swimming pool in his garden with a personal loan. The total cost of the works is 35,000 dollars. He opts for a loan over 36 months, and is offered a rate of 6.9%:
- The total interest is 3,727.-
- The monthly cost (interest and amortization) amounts to 1,075 dollars
In addition to the question of interest, future borrowers frequently wonder about the other costs associated with a loan. If each bank then practices its own methods, the following elements remain in principle applied:
- Booking fees: in principle no booking fees. Be careful, you must be wary of banks or lenders who claim fees before granting credit: these are often scams.
- Request for statement: in the event that the borrower requests from the bank a “statement” (total amounts paid and there remains to be paid), this service is in principle billed at 20 dollars or 30 dollars.
- Request for final statement: in the event that the consumer wishes to settle his credit in one go (ie to pay in full the amount remaining to be paid), he must then request a “final statement” from the bank. This service is in principle billed 150 dollars. In return, the fact of making such an early repayment saves on the interest to be paid: the payment being made over a shorter period than what is provided for in the contract.
In case of “normal” loan repayment, namely over the term agreed in the contract and without any specific request from the borrower, there are therefore in principle no additional costs to be paid.
Simulate the cost of your future personal loan
Do you want to know the cost of a future loan? There are many personal credit simulators which allow you to obtain the interest to be paid according to the desired amount, the repayment duration, and the rate offered by the bank. As an indication, this rate generally fluctuates between 6.9% and 9.9%, rarely less. If necessary, it is also possible to contact a specialist directly who can answer your questions and inform you about the possible costs of a future loan!