There is a big difference between different loans and you can save hundreds of thousands of dollars by choosing the right loan. Avoid the 7 Biggest Mistakes When Borrowing!
You do not compare different loans
Never forget to compare the APRs of your loans and the total repayments.
In the Hungarian credit market, there are large differences between the various schemes. This applies not only to prices but also to the type of loans. It is a great advantage to compare the different loans and choose the one that best suits your needs.
A bigger personal loan is a good idea if you want a new kitchen or big plans, for example.
A credit card , on the other hand, is a better option if you need a smaller loan that you can repay quickly. You spend as much money as you need. If you pay it back within 45 days, you will enjoy the benefits of interest-free .
You misinterpret THM
APR does not necessarily mean how much more money the lender has to repay.
Although the APR includes all the costs associated with the loan , it does not indicate how much more money you will repay at the end of the term.
The APR calculation used in the advertisements is based on a loan amount of HUF 5 million for a term of 20 years . If the conditions are different in our case, the APR may be higher or lower than what is advertised.
This shows how much you need to pay back to the financial institution over a year . The longer the maturity, the more you will be able to repay. This way, with up to 20% APR, we can repay more than 50% of the amount taken as interest.
You only need credit at the bank
Many people only think about their own bank when they want to borrow money. This may be a very good solution, but nowadays there are lenders who have more than competitive loans compared to banks.
You can probably get an excellent loan offer from your bank, especially if you are an old loyal customer, but there are several extra services that banks do not provide.
It can be a long process to get a loan from a bank. Borrowing from a lender who pays it off within 24 hours and you need the money right away can be a huge advantage.
You choose too long a maturity
When applying for a loan , you have to choose not only the amount of money but also the maturity . Always keep in mind the maturity you choose. The higher the maturity, the higher the total repayment of the loan.
Long maturities are attractive to most people, as monthly repayments are much lower than with short maturities.
True, short duration is not always the best idea. For example, if the repayment amount is too high relative to your income.
You should choose the shortest maturity that will not cause any problems with your monthly repayments.
Thinking in the short term
The need for money often comes unexpectedly and you need to quickly find a loan that fits your needs. So fast that you forget to consider the consequences that may occur in the future.
Before applying for a loan, check your financial situation and make sure you can repay the monthly installments.
If you are not sure you can pay for them every month, you may want to think longer term.
The important thing is to think carefully before applying for a loan. Think about how credit will affect your finances in the long run.
You borrow too much
It’s easy to raise money, so you borrow more than you need . You think you will only spend the surplus when you need it in the future.
It sounds like a good strategy, but you also have to pay interest on that money because renting is not free.
We recommend that you only borrow things you really need, not general consumption. This way, you take exactly the amount you need to solve the problem.
You can repay the loan ahead of time, but you will usually be charged other fees.
You are not creditworthy
This error occurs when your financial situation is simply not suitable for borrowing.
It is of utmost importance for the lender to have their customers in credit . The better their financial situation and positive payment history, the better chance they have of repaying the loan.
If you are on the KHR list , this tells a lot about you. It will be impossible to borrow and you will find it harder to solve your financial problems in an emergency.
But not only does the KHR list tell you about your solvency, but the following things can also show a negative picture:
- Your income is low. The lower your income, the lower your credit rating.
- You don’t pay your bills on time. Lenders are looking for reliable customers, so irregular repayments will negatively affect your creditworthiness.
- You have a big family. The more people you are responsible for maintaining, the less money you will have to pay off your loan.
- You do not own a home. The rent is considered an extra cost. If you pay rent every month, it will also put a heavy strain on your family cashier.
Fortunately, there are many things that can improve your credit worthiness. Start saving so you will have more money at the end of each month and a better financial situation.