I was thinking here to try to show a little about how big the differences can actually be for borrowing of different sizes. What I am talking about in the first place is the cost per month.
One thing to always keep in mind is that it is often difficult to know in advance what interest rate you will receive when it comes to private loans.
This is when the lenders usually talk about an interval within which the interest rate will be within which it is ultimately determined depending on the desired loan and who wants to borrow.
A few lenders offer smaller private loans
That have a fixed interest rate in advance. Therefore, when I first count here, I intend to use the example interest rate this loan intermediary has used. They have calculated 17.9%, which may be a bit high for some private loans.
If you borrow with this interest rate USD 400,000 for 15 years (which is probably Bank Norwegian) and with this interest rate, the total monthly cost for the first month would be as much as USD 8,160, where interest accounts for about USD 5,960. This is then calculated with straight amortization which is cheaper in the long run.
The total interest cost would be USD 539,681 during the entire loan period, which is very much actual, which corresponds to quite exactly USD 3,000 on average per month. Then of course amortization is added on this sum.
Now we must remember
That this is the example interest rate they used and it is probably clearly more justifiable for loans of USD 50,000 or something like that. One with the same interest rate and taken in 4 years would cost USD 18,260 in total, which would be USD 380 per month. It is still a fairly high sum we are talking about but it is clearly manageable.
The important thing is that you who borrow money are aware of what it really costs to borrow. This loan of USD 50,000 means that in the next few years you will pay out USD 68,260 in amortization and interest.
If you look at a slightly more realistic USD 400,000 loan, the figures can probably be a little better iaf. At the moment, only Bank Norwegian is offering this amount to its borrowers and they have the lowest interest rate 4.99%.
To add a little extra to that we therefore say 7%, which is quite a lot less than the almost 18% that I counted on before. The cost will instead be a total of USD 211 170 (more than USD 300 000 less in total), which is about USD 1,170 in interest expense eliminated per month.
Borrowing money is not cheap
And you should be aware of that. What you have to do is to set what you intend to do with the money in relation to what it costs and this is just something you can do yourself.
For example, I would probably think it was far too expensive to borrow money for a holiday in Norrland in the winter, but someone who likes snow and cold might think it would be worth it. It’s just that you really think about your decision before it is made.