If you need alternative sources to finance major expenses such as your children’s tuition fees, a vacation to more expensive destinations or even trying to solicit capital to start a business, then you may be looking for personal loan solutions.
If your financial conditions are stable, do not hesitate and compare the entire personal loan market. Whatever the purpose of the amount requested, it is important to analyze and choose the solution that best fits your needs.
Personal loans work differently from other types of credit (credit cards and home loans, for example). So if you don’t know how to compare personal loan solutions, we’ve put together the most important features to look at when looking for a loan.
1. Payment Term
Each approved loan corresponds to a firm and binding contract with the financial institution. The payment term (the time during which you will make the monthly repayment) is an important part of this contract.
Think of the repayment term as a strict payment program that you have agreed to with the bank, because there are consequences if you stop paying your monthly installments and also because you have to pay commissions if you want to repay the debt early.
Therefore, choose the payment term that best suits your situation, either 12 or 120 months. However, it is important to realize that regardless of personal credit solutions, the longer the payment term, the lower the monthly amount to pay. On the other hand, the higher the amount of interest, and thus the higher the total cost of credit.
2. Annual Effective Annual Rate (APR)
All personal credit solutions have associated interest rates. In this case, the corresponding rate is the Annual Effective Annual Rate (APR).
This fee includes not only interest charges, but also all bank fees, processing costs and insurance costs associated with personal credit solutions.
To be able to effectively compare different personal credit solutions, please be aware that you will only get a reliable comparison if you are considering the same repayment term and the same amount of financing as well as the value of the associated insurance.
3. Total Consumer Amount (MTIC)
The total cost you will pay for the amount requested from the bank, referred to as the Total Customer Imputed Amount (MTIC), is influenced by several factors.
The MITC includes, in addition to the amount of financing, the interest rate, insurance underwriting, tax payable, bank charges and other charges associated with the credit.
Although you can know how much you pay each month to the bank through the monthly installment, the truth is that only through MTIC can you get a sense of how much you will have paid at the end of the contract.
For example, a shorter repayment term and a lower borrowing value allow for a lower MTIC compared to a higher maturity and amount to be financed.
4. Insurance associated with personal credit solutions
The underwriting insurance in the most common personal loan solutions is life, unemployment and sickness insurance. These insurances make it possible to pay the amount owed in the event of what is provided for in the insurance clauses (for example, in the event of invalidity or death of the life insurance holder, the debt is settled).
As a rule, the amount of insurance payable by the consumer is included in the MTIC and diluted by the various monthly installments payable throughout the credit agreement. However, personal credit insurance is often almost mandatory before you can see your claim accepted by banks.
There are then four essential aspects to comparing and choosing the best option among the various personal credit solutions: the payment term, the total cost of credit (MTIC), the interest rate (APR) and the underwriting insurance. For a fair and reliable comparison always consider the same payment term and the same financing amount.