Banks and loan companies entice customers with cheap loans. Unfortunately, after a closer analysis, such offers often turn out to be less attractive than they initially seemed. Instead of blindly believing lenders’ assurances, it is worth choosing a loan based on rational, well-founded criteria. How can you find the cheapest financing? Let’s check.

Do not be misled by appearances

Offers for loans with an interest rate of 0 percent appear on our market regularly. Although many customers, tempted by the prospect of borrowing money cheaply, decide to use them, such offers do not always prove to be a good choice. Why?

Banks often compensate for lower interest with a high commission. Following this line of reasoning, it often turns out that a loan with an interest rate of 0 percent and a high commission is more expensive than one with a standard interest rate and a lower commission. The following example illustrates this perfectly:

If you decide to take out a loan of PLN 3,000 for 12 months with an interest rate of 0 percent and a 20-percent commission added to the loan amount, its total cost will be PLN 600.

If you take out a loan of PLN 3,000 for 12 months with an interest rate of 9 percent and a commission of the same amount, added to the loan amount, the total cost will be PLN 393.84 (PLN 270 commission + PLN 123.84 interest).

The parameter that makes it possible to determine the total annual cost of borrowing money is APR, or the annual percentage rate of the loan.

Pay attention to the APR

When analysing loan offers available on the market, we primarily pay attention to the interest rate. Lower rates are automatically associated with a cheaper loan, while higher rates become synonymous with an expensive loan.

However, this way of thinking can be a considerable trap. The total cost of financing consists not only of interest, but also of a commission, insurance and often other additional costs. The parameter that makes it possible to determine how much you will actually pay for borrowed money is APR, or the annual percentage rate of the loan. APR includes all costs associated with granting the loan. The lower it is, the cheaper the loan.

Before analysing the annual percentage rates of non-bank loans, you need to know that they are relatively high. However, this is not caused by the enormous cost of borrowing money. APR determines the total cost of a loan over a year. Since payday loans are short-term products, generally granted for 30 or 60 days, their APR will be correspondingly higher.

Look for free loans

Not everyone knows that non-bank loans can be cheaper than those offered by banks—cheaper, or even completely free. Many non-bank institutions currently offer entirely free loans. With this type of financing, you will pay neither interest nor a commission, insurance or any other additional fees. The APR of a PLN 0 loan is exactly… 0 percent. Depending on the lender, you may be able to borrow between PLN 100 and PLN 6,000 for free.

Most non-bank institutions do not require additional documents or certificates, and make decisions based solely on the information in your identity card and loan application. You can successfully complete the entire loan application process online, without having to leave home. Convenient and comfortable.

Importantly, only a new customer who has never previously used the services of a given loan company can apply for a free payday loan. The only—and crucial—condition for avoiding fees is repaying the obligation on time. This is particularly important because the maximum repayment period, depending on the particular lender, is only 30, 60 or 61 days. A quick PLN 0 loan will therefore be a good choice only if you are absolutely certain that you will be able to gather the required amount within a maximum of two months.

Compare offers

An effective way to take out the cheapest loan is to compare the offers available on the market. When analysing the parameters of individual financial products, it is worth considering not only the cost of borrowing money, but also the repayment period and the costs associated with late repayment. Although most lenders certainly do not plan to delay loan repayment, it is worth knowing the lender’s position on this issue.

To save time and eliminate the risk of mistakes, use one of the loan comparison websites available online. This will give you access to a verified, reliable database of lenders. You will also be able to compare the financing terms offered by each company and choose the one that best meets your expectations.

Consider the costs of late repayment

If you take out a non-bank loan and are unable to repay the money on time, you have two options:

  • taking out a refinancing loan or extending the repayment deadline,
  • not settling the debt and exposing yourself to debt-collection proceedings and additional costs.

Although most lenders do not take such scenarios into account, it is impossible to eliminate them completely. Before taking out a loan, therefore, check what fees you will incur for refinancing, extending the repayment deadline and debt collection. Their amount should be another argument in favour of choosing a particular lender.

Think before you borrow

The widespread availability of popular payday loans means that more and more Poles are using them. However, it cannot be denied that not all decisions to borrow money are carefully considered. This can have long-term and extremely painful consequences—not only for your wallet.

Before signing an agreement with a lender, make sure you can afford to take out the loan. To do this, carefully analyse your income and expenses. This will allow you to accurately assess whether borrowing money will place an excessive burden on your budget.