When deciding on a loan, the most important thing is to read all the provisions in the contract. This is important because later we can be disappointed with the amount of final loan costs. You also need to consider whether to choose a fixed or variable loan rate. This has a large impact on the amount of the liability, both monthly and in the scale of all costs that make up its repayment.
Fixed or variable loan interest rate – what do they depend on?
Banks do not necessarily like to reduce loan installments, as this generates their financial losses. It is different in the event that they can use the provision stating that they can change the interest rate to a higher one.
This usually happens when the Monetary Policy Council raises the interest rate. In order not to be loss-making, banks increase the interest rate on the loan granted. They can do it in the next month, quarter or only after half a year. It is possible to provide in the contract that the cost of the liability will increase as soon as the interest rate reaches a specific value.
Also check what other elements affect the cost of the loan.
Raising interest rates by the MPC, however, has no impact on liabilities for which the fixed interest rate option has been applied. Therefore, borrowers do not have to be afraid that suddenly their installment will increase by several dozen zlotys, or as in the case of mortgage loans by up to several hundred.
To check the loan installment, use the loan installment calculator.
Which interest rate should you choose?
Fixed or variable interest rate? This should be considered by everyone who gets the opportunity to choose. First of all, the loan period and the potential risk of installments increasing should be taken into account. The type of loan is also important, because as already mentioned in the case of a mortgage, the difference can be colossal, and in terms of its final value even up to several tens of thousands. In such situations, we may have a serious problem with loan repayment, check what to do then.
Varied interest rate variant
Rarely, however, the varied interest rate variant used is for a cash loan that is granted for a short period. Banks are well aware that interest rate fluctuations are quite rare and are unlikely to earn much money on it.