Mainly two factors determine the cost of your car loan: the loan amount, and the interest tete. I.e. how much money you are loaning, and the cost that applies to your loaning of money, respectively. Further charges can apply as well, whereas some are more or less hidden costs that circumvent you, making you only compare the loan’s interest rate. Below you will find more information as to what factors affect your loan, and which costs you should keep your eyes on in order to get the most beneficial deal.

What determines the cost of your loan?

If you are to acquire a loan, the two main things to look for are the loan amount and the interest rate.

A higher loan amount means a higher cost each month, but for the same interest rate. A higher interest rate of course means a higher cost each month as well, but for the same loan amount. The interest rate will be set depending on how probable you are to be able to pay back the loan. This means that the entity who loans you money will, before granting you a loan, check your credit history and evaluate your ability to pay back. The higher the risk is of you not being able to pay, the higher the interest rate, and vice versa. Of course you can be denied the loan entirely as well.

Keep in mind that your credit history can look worse if several checks have been conducted in a short period of time. To avoid this, you can make use of some of the services that exist, which provides you with several loan offers after just one check of your credit history.

Hidden Costs

Apart from the aforementioned, be aware of notification and arrangement fees. These are not always overtly displayed, and can result in relatively large costs in addition to the loan. For example an arrangement fee of about 300 SEK, which isn’t a very large amount for a larger loan. However if you were to purchase a television for 3000 SEK and payed for it through an installment plan, where the same arrangement fee of 300 SEK applies, the purchase becomes 10 percent more expensive straight from the beginning. In addition to this, interest rate and notification fees can apply.

Also, be sure to read the fine print of the loan conditions, and find out about the effective rate of the loan. This includes all the hidden costs that comes with the loan, thus showing the real cost of how much you are actually going to pay. Hence, the effective ratet is what you use when comparing different loans.

There are several services that can give you an overview of the alternatives when you’re looking for a loan to finance a car, and which helps you compare the different ones. We strongly recommend you turn to one of these before making a decision. Some alternatives for the Swedish market include billån24.se, Compricer.se and Advisa.se.

 

Please not that all of the above concerns the Swedish market, in terms of where the information has been gathered from and to where it applies.