Which costs does a beneficiary have to pay for a credit
Compare credit providers and the additional fees they charge
Everybody knows the feeling to have a wish that one simply cannot afford at the moment. To fulfill these wishes, a credit is usually needed. It may be to finance or build a house or simply to buy a new car. All credits have one thing in common, though; they all involve additional fees. Every credit comes with these additional fees, meaning that no financial institutions will hand out a loan free of charge. But what kind of costs do beneficiaries have to pay when applying for a credit? It depends on the respective bank as the amount of fees can be very different.
The interest rate is the most important fee a beneficiary has to pay when taking out a credit. The nominal interest rate are known as the cost for the credit itself, but it only includes the actual interest payments. One has to look at the effective yield to find out how expensive a credit really is. The effective yield includes all additional costs, even one-off fees. That may include arrangement fees, sales charges or commissions that may occur if the credit is arranged by a third party. Moreover, credit costs usually involve agio or disagio, i.e. addition or deduction. It is very rare that these costs are not included when it comes to a credit. Additionally, many banks demand an insurance in order to secure the credit in different cases, e.g. if the debtor becomes unemployed, gets ill or even dies. Therefore, a life insurance to secure a credit is not uncommon. If it is a combined offer, the costs for the life insurance will have to be included in the overall costs for the credit. When it comes to financing real estate, there may also be an authorised expert involved who estimates the value of the respective house or apartment. Assigning such an expert may involve some costs, again adding to the overall costs for the credit. To sum up, the costs for any loan have to be calculated based on the interest rate and all additional fees. These costs will vary from bank to bank, some banks will not even charge for certain services. While some of them will not insist on applying for a credit insurance, others may say that this is a necessary prerequisite. At the same time, differences like this make it clear that it is important to compare more than one offer as additional credit costs have the potential to make a credit very expensive in the end.
