Fixed interest rate – This you should know when you have a loan
A loan can have either fixed or floating interest rates. If you choose a loan with a fixed interest rate, your monthly cost is the same during the period the interest rate is bound – which naturally creates a sense of security. However, there are major drawbacks to the fixed interest rate, which is usually more expensive for you as a borrower.
What is fixed interest rate?
Fixed interest rates mean that you fix your interest rate for a certain period of time, usually during the entire repayment period for private loans. As for mortgages, you can fix your interest rate for up to 10 years at most, even though the most common bond term for loans to the home is between 3 months and up to 3 years. The fixed interest rate is thus not fixed forever. When the time you have fixed your interest rate has expired, you can extend the bond term again. This means that you have a new opportunity to either tie up again or choose a variable interest rate.
Why choose a fixed interest rate?
If you choose a fixed interest rate, you get a good overview of your future monthly costs. During the period you have fixed your interest rate, your loan will not be affected by changes in the general interest rate situation. It creates security and security for you and your personal finances. However, the fixed interest rate is usually higher than the variable interest rate. So you pay for your perceived security.
Why should you have variable interest rates instead?
Fixed interest rates have, over the years, meant that the borrower has a higher interest rate compared to if the loan were to be variable. So you often pay extra for the security and transparency you get when you fix up your interest rate. The most common in Sweden is private loans with variable interest rates. Our estimate is that about 5-10% of Swedish lenders offer fixed-rate loans.
Another significant factor is something called interest rate differential compensation. This means that the lender is legally entitled to charge a fee if you decide to pay off the loan early. For mortgages, the fee can be several tens of thousands of kronor. The rules for private loans without collateral, on the other hand, look different. The lender will then at most pay out 1% of the remaining debt. This means that a bank loan where you have $ 225,000 in the remaining debt costs $ 2,250 to redeem prematurely.
Benefits of comparing the banks
It can be difficult to know if you should choose fixed or variable interest rates for your loans. If you have any questions about this, please feel free to contact us at Astro Finance. Regardless of whether you want fixed or variable interest rates, you benefit from comparing the banks. All banks specialize in different types of customers. It is therefore not possible to say that one specific bank is better than another in advance. This is why it is important to compare different loan offers to find which bank suits you best!
If you as a private individual go to several different banks to compare the terms, they each take credit information on you. This affects your credit rating and can impair your ability to get a really low interest rate. If you choose to compare with Astro Finance, only one credit report is made.
The service is completely free of charge and you do not commit to anything when you make a comparison. Instead, Astro Finance gets paid directly by the bank or lender when we can help them get a new satisfied customer.