Do you take a loan or a loan? Remember to check the offer carefully. Find out the interest rate, commission and margin to know how much monthly installments will cost you. Not everyone knows that a floating rate loan means that installments can increase significantly during repayment.
Can the loan installment amount be set once?
Yes, if your loan bears interest at a variable interest rate. Not everyone knows what is the difference between variable and fixed interest rates on loans and what this means for borrowers.
For most customers, the most important thing is that you get a cash loan quickly and that the loan installment is low. This lack of interest sometimes results from a lack of knowledge or a rush.
What is the floating interest rate?
The name speaks for itself – the variable interest rate is one that can change during the repayment of the liability. Floating interest rate is most often used in mortgage loans, less often in cash loans. It consists of a combination of a fixed bank margin and a variable element – the WIBOR indicator.
These rates may change every 1, 3 or 6 months.
If the margin is 3% and the WIBOR 3M rate is 5%, then the interest rate on the loan will be 8%.
If the WIBOR 3M ratio increases to 5.5%, the interest rate may (but does not have to) increase to 8.5%.
If the WIBOR 3M ratio is reduced to 4.5%, the interest rate may (but does not have to) fall to 7.5%.
Change in interest rates – how does it affect the interest rate on the loan?
One of the reasons for the change is raising the interest rates by the Monetary Policy Council.
If the Monetary Policy Council raises interest rates, banks are eager to raise interest rates on loans. Of course, this does not happen right away – it depends on the provisions in the contract.
In one bank, these indicators can be updated monthly, in another – every three months or every six months. Added to this is the amount of indicator changes. It may happen that the interest rate will be updated only when the indicator changes by a specific minimum value, e.g. 0.6%.