How do you compare credits?
To compare two credits, do not look only at the monthly instalment: the APR, the term and the total cost of the credit give a fairer picture. Here are the essential criteria for comparing several credit offers and choosing the one that truly matches your project.
The criteria to compare
The APR
The APR (annual percentage rate) expresses the total annual cost of the credit, including interest and certain fees. It is the indicator to compare between several offers, for equivalent amounts and terms.
The term and the total cost
A low monthly instalment can hide a very long term, and therefore a high total cost. Always compare the total amount to repay, not just the monthly instalment.
The terms for early repayment
Can you repay earlier, and at what price? For an instalment loan, a reinvestment fee may apply; for a revolving credit, an additional repayment is possible at no cost. See early repayment.
Comparing the types of credit with one another
- An instalment loan gives complete visibility: monthly instalment, term and total cost are fixed;
- A revolving credit offers flexibility: you only pay interest on the sum used;
- Credit consolidation simplifies your budget, but may increase the total cost if the term gets longer.
Where can you find the figures?
The representative examples for each product are given in the legal notices: they state the amount, the term, the monthly instalment, the total cost and the APR.
Mistakes to avoid
- Looking only at the monthly instalment;
- Comparing offers with different terms without looking at the total cost;
- Borrowing more than necessary because “it is possible”.
