Lending is always associated with the need for interest payments for the use of borrowed funds. But there are several ways to reduce future loan payments and reduce overpayments.
It is possible to reduce overpayment on loans by issuing a loan at a lower interest rate, or which does not imply the presence of additional commissions.
Low interest rate on a loan
Low interest rate on the loan reduces the amount of overpayment. To get a lower interest, you should avoid loans without income confirmation and express loans. The more available a loan is for borrowers, the less profitable it is. In this case, the bank shifts its risks onto the shoulders of borrowers in the form of increased interest rates. If you want to reduce the overpayment, you should take a few minutes and collect documents confirming your income and work experience. Another option is to take a loan from the bank where you receive your salary. Banks provide salary clients with more favorable lending conditions by requesting a minimum package of documents.
Another way to lower the interest rate is to attract collateral and guarantors. Additional collateral gives the bank a guarantee that the funds will be returned.
It is also worth focusing on targeted loans, for which interest rates are lower than for non-targeted cash loans. In the first case, the money is not handed out, but directly transferred to the seller's account. Targeted loans are 3-10% cheaper than non-targeted loans. For example, these include mortgages, car loans.
Overpayment can be reduced by using special joint programs of banks and manufacturers. In particular, some banks and car manufacturers have such programs today. They allow you to get a reduced interest on loans when buying certain car models.
If you prefer non-cash payments, then you better get a credit card. When repaying debt during the grace period, interest for the use of borrowed funds is not charged.
It should be borne in mind that low interest rates do not guarantee a lower overpayment. Therefore, you should always pay attention not to the nominal, but to the effective interest rate, which includes all additional commissions. It can be two to three times higher than the nominal.
No additional commissions on the loan
The amount of overpayment on a loan is significantly influenced by additional commissions. They can be one-time and monthly. Lump-sum commissions include payments for reviewing a loan application and providing a loan. Monthly fees may include account management and maintenance fees. An increase in overpayment on a loan also entails the need to obtain life and health insurance. Sometimes expensive insurance is a prerequisite for obtaining a loan at a low interest rate.
Making monthly payments without commissions
You should try to make all payments on time. Otherwise, you will have to pay penalties established by the bank for late payments. It also increases the amount of overpayment. Therefore, it is worth taking out a loan at a bank that has a branch or ATM with a cash deposit function near your home.
If you repay the loan through third-party ATMs or organizations, money transfer fees will be added to your monthly payments.
