Many are aware that the cheapness or cost of a loan depends on interest rates. Of course, the story is not that simple, but the numbers are sure to answer a lot of things. So we did a little case study that will be instructive for you too, Keep with us!
What is Interest?
The interest on the loan is the real profit of the bank. This is the amount for which the bank gives us a higher amount of money and undertakes to repay it in small installments during the term of the loan . The lower the interest rate, obviously, the less you pay back on top of the loan taken.
The specific interest rate of our loan is the base rate plus the interest premium. That is, whichever of the two goes up, the interest on our loan will go up and we will repay more.
Fixing of interest
There is a good opportunity in our hands if we do not want our loan installment to increase. This is called the interest period . This is a period during which interest rates remain unchanged and thus our monthly repayments. It is important to pay attention to this when calculating your loan calculator as well as the monthly amount itself. It is also possible to have the same monthly installment throughout the term, but we know that this will not be the cheapest initial installment. Let’s count a bit!
What is the difference in a 1% difference in interest rates?
If we calculate the interest rate and repayment on a 20-year $ 15 million home loan , we see that 2.48% is the cheapest APR and the related installment is $ 78,466. A total of US $ 19,032,086 will be returned to the bank.
If the interest were 3.48%, our repayment would jump to $ 86,840 . The total repayment amount is HUF 20,841,600. As we can see, this is an extra $ 2 million for us, so we assumed everywhere we would have a fixed repayment.
Well, that’s why it’s worth considering not only the initial repayment, but also the interest and the interest period when borrowing. Contact us for all the little tricks and interesting things! We help you make the most of your credit.