Thrift is a virtue that helps in many areas of life. When it comes to credit, but that is only partially true. Because who saves in the wrong place, may pay later on it. Choosing too low a funding amount is one of the most common mistakes in borrowing.
Saving is good – but only with the interest
With regard to the lending rates thrift brings you a clear plus. The less interest you have to pay for your loan, the better. The comparison of different offers is therefore definitely useful. You can either make such a credit comparison on your own, or you can rely on the support of experienced professionals like Gandalf. The decisive factor in the credit comparison is the annual percentage rate. This is the interest rate that includes all credit costs. So it’s the “most honest” interest that tells you the true cost of credit.
With a “small” credit you save only seemingly
The second adjusting screw for the borrowing costs in addition to the interest is the financing amount. The more money you borrow, the more you have to pay back – so far, so logically. Also that you pay the bottom line more interest for 10,000 euros for 5,000 euros, is understandable. But that does not mean that the smaller loan is automatically cheaper and thus better.
Experience has shown that many borrowers underestimate their actual funding needs. For example, they believe that € 5,000 will suffice and are therefore limited to a loan of this size. Maybe the money is actually enough to pay due bills, balance the account or pay for an acquisition. But what happens when the next unexpected costs arise? When suddenly the washing machine, the TV or even the car go on strike? Then there is a financial gap that could be closed by a loan – if not only a few months before a loan would have been disbursed. “Upgrades” are unfortunately not so easy, and so takes too low a loan amount quickly.
Many consumers now either have to overdraw their bankroll and pay extremely high interest on disputes or, for example, take out a debt-free loan. However, such a loan is almost always associated with higher interest rates than a regular loan. However you turn it, it will be expensive. Much smarter (and cheaper) would have been to apply directly for a slightly higher loan. The currently unneeded portion of the loan is simply “parked” in your account, giving you a reassuring “cushion”. This approach is especially worthwhile in times of low interest rates.
Conclusion: In the loan amount better not expect too sharp pencil and rather take a slightly higher loan. Sooner or later that almost always pays off.