Loans are constantly changing interest rates and sometimes they are 5% up to 10% per annum, but again at other times they are 1% – 3% per annum. Such changes occur as a result of economic cycles, and when the bubble begins to appear, creditors offer cheap loans and prices only fall, but when a crisis or recession occurs, interest rates are rising rapidly and creditors have to pay much more than at the time of borrowing.
Banks also offer a basically variable interest rate
Therefore, banks also offer a basically variable interest rate or a constant bank interest rate and an additional floating Euribor rate, which means that you will have to pay more in this or when the crisis starts, as both interest rates will rise. But if you are able to get a loan with the same interest rate for the entire time of receiving the loan at a very low interest rate, then you definitely need to use it, otherwise it would be foolish not to use it.
This is exactly what governments are thinking when they lower their base interest rates to boost lending, because then individual interest rates will remain much lower. And I cannot disagree, a loan with a fixed interest rate of, for example, 3% per annum for the entire time of receiving a loan is too good for a service to not accept.
But with this credit you need to be careful, because at a time when such low interest rates are offered, something is wrong with the economy and you have to look at whether prices have risen sharply in recent years, because if it is then you are in an economic bubble and at the moment you will be losing this money.
Spend only part of the money and leave the rest
If, on the other hand, you borrow and spend only part of the money and leave the rest, then you will also be secured for the future as a reserve, because in a situation of recession, you will have free funds to either pay the loan and its interest or what to invest in very cheap properties and other commodities that will suddenly fall in price.
The key is that the credit has a low fixed rate, because if you take a loan at a floating rate, it may end badly and you will definitely get this rate during the crisis, and so your credit payments will climb, which is not pleasant if you already have your wages are decreasing everywhere, but you have to spend even more of your salary on loan repayment. So be very careful with these rates and thoroughly study them before you take your next credit.
Even if the bank says they offer a fixed rate
Ask how long it is and if they have a fixed rate for half a year or a year then it may be even worse because then at the time of the crisis you bet exchanged, but, for example, if it ends in the middle of the year, you will still pay a higher interest rate throughout the year.
So next time you offer a cheap credit you will thoroughly understand everything about these percentages and if they are low and you choose to get a loan, think about where and how you will spend that money! And if you are lucky, then it is possible that you will take the credit at the right time and will be able to buy the goods at much cheaper prices over time, but only if you have a fixed interest rate! But here we have to say that the economic crisis usually does not end so quickly and lasts.