In the USA, relatively few people can afford to finance all their needs in cash. More serious expenses such as buying a better car, going on holiday or a new computer are often financed with funds obtained from loans. One of the most popular credits on the American financial market is cash credit. What is the reason for its popularity? Mainly because it is relatively easy to get. Compared to a mortgage or even a car loan, the formalities are really not complicated. An additional advantage of this loan is that in the process of applying for it, we do not need to inform the bank about what we are going to spend the money on. The bank cannot ask us for such information either. What is the characteristic feature of this type of credit? How to find the cheapest cash loan? I will read about it in this article.
Characteristics of cash credit
What are the characteristics of cash loans? First of all, it is worth noting that loans can only be granted by banks. It is regulated by the provisions of the Banking Law Act. Therefore, the credit company of banks is subject to strict restrictions. In addition, the Financial Supervision Authority also supervises banks, which ensures the proper functioning of the financial market in the USA. KNF often issues recommendations which banks are obliged to follow. In the face of such restrictions, the credit policy of banks is strictly regulated. The fact that banks impose a number of requirements on borrowers results directly from the provisions of the Act.
What costs are associated with a cash loan?
The most important cost of a cash loan is interest. They result directly from the interest rate of the loan, which the bank gives on an annual basis. It is worth noting what can be the maximum amount of such an interest rate, which we call nominal. Well, it cannot exceed four times the lombard rate. The amount of this rate is determined by the office. There are two types of credit interest rate: fixed and variable.
In the case of a fixed interest rate, it has the same amount for the whole credit period. It is usually used for short-term loans. The variable interest rate consists of a fixed part, i.e. a margin, and a variable part. The latter part is subject to change depending on which reference point it is calculated for. Most often this reference point is WIBOR. It is nothing more than the interest rate applicable on the interbank market, which is subject to constant changes. Everything also depends on the level of interest rates set by the Monetary Policy Council.
Which interest rate is more favourable. From today’s point of view, many specialists will say that the interest rate is definitely variable. This is mainly due to low interest rates. At present, a credit with a fixed interest rate is simply too expensive and unprofitable. But that is not entirely true. Much depends on the period of credit. It is necessary to look at the credit costs from the perspective of the entire duration of the credit agreement. If we take out a long-term loan, let’s say for 8-10 years, then we should consider whether fixed interest rate is not a better option. In such a long time perspective, it may turn out that interest rates and, consequently, the interest rate on loans will increase. Then it may turn out that the loan taken today with a fixed interest rate will be relatively cheap in the long term.
The cheapest cash loan
How to find the cheapest cash loan? To do this you need to analyze the credit offers in terms of the RRSO parameter. This is the Real Annual Interest Rate, which banks calculate according to the same rules as those provided for in the Consumer Credit Act. Thanks to the uniform method of calculating the APR, it is a good tool that will enable us to make a reliable comparison of credit offers.
APR is given in percentage terms. It perfectly illustrates the relation between the total cost of credit and the sum of borrowed money. This parameter includes nominal interest rate, commission, margin or preparation fee. However, you must know that in the case of variable interest rate, in case of a significant increase in the level of interest rates, credit costs may increase.
Low installment
For many borrowers, it is not the loan costs that are most important, but the amount of the monthly instalment. Therefore, they often prefer a long-term loan, where costs increase, but it is possible to set the installment at a satisfactory level. Credit installments can be equal and decreasing. The latter option is by far the most advantageous for borrowers. The interest included in the instalment is paid on the outstanding principal.

Cheapest cash loan
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