Sometimes bank employees smile quietly when they hear that their financial institution doesn’t know what borrowers really want when they apply for a loan. This is not a question: everyone in the bank knows that every borrower wishes that the cheapest possible loan from the bank would jump out for him.
The problem that sometimes arises in the communication between bank employees and customers is that the latter have a problem with recognizing what it really is a cheap loan.
A cheap loan from a bank: the so-called loan order
Each bank offers different types of loans: Roughly, these include earmarked loans (car, construction) and unrestricted loans (overdraft facility, personal loan, instant loan).
The question of whether a loan is expensive or cheap is measured by how high the interest rates are: There is something like a loan sequence for all loans: Traditionally, earmarked loans are among the cheapest loans: At the bottom is usually the construction loan ( because the rates are immensely high anyway due to the extreme amount of the loan), followed by the car loan, then comes the personal loan, this is followed by the instant loan and the most expensive loan is practically always the overdraft facility on the checking account.
A cheap loan from a bank: compare cross-over
So if you want to know when a cheap loan from a bank is available, it makes no sense to compare the different loan types of a bank. A overdraft facility will always be more expensive than a home loan. However, this says nothing about how expensive or cheap the overdraft facility is compared to what other banks offer.
So in order to really answer the question of whether the overdraft facility is cheap or expensive, you have to cross-compare with other banks and not across a bank.
A cheap loan from a bank: think about other costs
In addition, you should make sure that your own comparison is complete, because loans unfortunately not only cost interest, but also other fees and charges. For example, administration fees are traditionally used. However, the comparison of these is easy as there is almost always an APR that includes these costs.
The question of hidden costs, which may only be due, is more exciting. A prime example of this is the cost of a special repayment: These must also be included in a comparison.