August 9, 2018 Money does not provide happiness, but helps lead a peaceful life. When they are missing, we can take advantage of the banks’ offer. How much does the loan cost? This is the issue that interests us the most when we consider proposals from financial institutions. Our experts will advise you on how to calculate the cost of a loan and what to do to reduce unwanted fees. This is very useful knowledge, both when we take a cash loan and when we want to find out how much a mortgage costs!

## How much does the loan cost – what does the loan cost?

A cash loan, also called a consumer loan, is a lender providing a borrower with a certain amount of money for a specified period of time, in accordance with the terms of the contract. This is one of the most popular ways of financing our needs and sudden expenses. When we are looking for a loan, we should not only suggest advertising. The slogan “the lowest interest rate on the market” does not mean that we will be released from costs and we will receive a loan for free. When looking for the right offer, we must pay attention to what elements make up the total cost of the loan and choose the offer that will be beneficial to us.

What usually makes up the cost of the loan?

- commission – a fee which the bank charges for granting a loan. Paid once or included in the monthly installment. Its amount is determined as a percentage of the loan value. If a financial institution offers a commission-free loan, it will compensate for the loss in a different way, e.g. by imposing the need to purchase additional products,
- interest rate – one of the main loan costs. The first type of interest rate is fixed rate. It lets you know the installment amount when you take out the loan. It does not change during the loan period and mainly applies to short-term loans. The second type of interest rate is variable interest rate. Its value is not constant because it depends on interest rates set by the NatBank of Poland. The rules for changing interest rates should be indicated in the contract and information form,
- type of installments – fixed, decreasing and increasing installments. The customer should verify which installments will be most favorable for him and will not significantly affect the total cost of the loan,
- credit insurance – collateral for loan repayment in the event of job loss, illness or death of the borrower. It may be voluntary or compulsory, but we will certainly appreciate its importance in a difficult life situation. It depends on the loan amount and the loan period.

The bank should provide us with a loan simulation showing all costs, installments and payment method. We can also calculate the loan costs ourselves.

## How do you calculate the cost of a loan?

How to calculate the total cost of the loan and check how much the loan costs? We can make independent bills, but it is quite a tedious task. After all, we will quote the designs that we use depending on whether we have chosen fixed or decreasing installments.

### How to calculate the cost of credit – fixed installments

When we decide on a loan with fixed installments, we calculate a single installment based on the formula:

in which individual symbols mean:

- R – loan installment,
- K – value of capital borrowed,
- N – number of loan installments,
- q – percentage ratio.

The value of “q” is calculated from the formula:

where:

- r – interest rate expressed in a fraction,
- m – the number of periods of capitalization.

### How to calculate the cost of credit – decreasing installments

In the case of loans with decreasing installments, we use the formula:

in which individual symbols mean:

- R – loan installment,
- K – value of capital borrowed,
- N – number of loan installments,
- n – number of installment sought,
- r – interest rate expressed in a fraction.

The amount of each installment should be calculated by yourself. Then we sum up all installments, getting the total cost of the loan.

## Loan calculator – calculate the loan installment

A much easier solution that helps in calculating the loan installment is to use the loan calculator. The cash loan installment calculator is a simple tool in which you enter the loan amount, loan period and interest rate, obtaining an indicative installment schedule. In more advanced calculators, we can also take into account the type of installments, choosing between equal and decreasing installments.

How do you calculate the cost of a mortgage? You can also use the mortgage calculator by simulating real costs. Let’s check how much a mortgage costs and what affects its costs, especially since interest in mortgage products is constantly growing.

## How much does a mortgage cost?

Cash loan is one of the more popular but not the only form of financial support provided by banks. When we are planning to convert rent to buy an apartment, we will need a mortgage. We already know how much a cash loan costs. What costs are associated with a mortgage?

When deciding on this type of loan, in addition to standard payments, we must also be prepared for the costs associated with:

- with own contribution – today banks require having about 20% of the loan value. If they reduce their own contribution, they demand additional security,
- insurance – both life insurance and real estate insurance and bridging insurance (security for the bank in the period between the payment of the borrower’s funds and the final entry of a given mortgage in the land and mortgage register),
- compensation fee – many banks charge a fee for faster loan repayment, calculated during the first 5 years,
- at the expense of a real estate appraiser – the bank wants to know the exact value of the property before granting a loan.

## 5 ways to reduce your loan installment

Is it possible to reduce the cost of the loan? First, we are looking for financial products that will help us implement our plans, and then – ways that will help us reduce the cost of the commitment as much as possible. What to look for to reduce the cost of a cash loan?

5 ways to get a lower installment:

- Don’t borrow more than you need. Each additional PLN of the loan increases the value of the amount that you will have to return.
- Settle installments on time, and preferably – pay off your loan early. Before that, verify that the bank does not charge an additional fee for early repayment of the loan. You can also immediately decide on a shorter repayment period. Remember – a longer term is a lower installment, but also higher loan costs.
- Carefully analyze the costs and choose the most attractive offer. Do not choose a bank just because you have a personal account. If you get an interesting offer for a regular customer, you can consider it. But don’t cross out other institutions – they can also offer you attractive conditions! Check what will be more profitable?
- Verify the offer of additional products (the so-called cross selling offer) that can bring benefits in the form of reduced costs.
- Negotiate conditions, especially when you have high earnings or apply for a mortgage and you have a large own contribution. You won’t lose anything and you can really gain a lot.

Before you apply for a loan, however, make sure you have the best possible credit rating. Thanks to this, the conditions for granting the loan will be much more favorable, and you will be more confident that the bank will provide you with additional funds. The best loan offers can be found in the cash loan ranking.

## Credit and loan – is the cost of the loan higher?

Loans are not the only form of financial support we can apply for when we need an injection of cash. We also gladly use online loans. Will we pay more by choosing a quick non-bank loan offer?

Unfortunately, yes, but higher costs are not unfounded. Lending companies place much less stringent requirements on clients. They grant loans without certificates, pay out money in 15 minutes, have special offers for those in debt. Therefore, although the monthly installment turns out to be higher, we repeatedly choose the offer of non-bank institutions.

Decide for yourself which financial product you want to use and get the funds for your needs! Now you know how much a loan costs and what elements affect the cost of a loan. Make wise decisions and your home budget will be safe.

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