Being able to choose between several credit offers with low interest rates is a boon for customers. Indeed this is especially the case for those who have taken out a mortgage. For those who have applied for consumer loans, however, the story is quite different. Indeed this kind of loan is always quite expensive. Why such a difference? This is what we will try to explain to you.
An economic situation which favors loans with low interest rates?
The current economic situation facilitates the establishment of low interest rate credit. In any case, the specialized press is unanimous on this. However when we look at specific cases, it is not the same catchphrase for all borrowers.
On the one hand, you will find those who take full advantage of this situation. They are the ones who applied for home loans or housing loans. In fact, on this type of credit, the rate of usury (a reliable indicator on borrowing conditions) has dropped drastically by 36%.
From 4.3% five years ago to 2.77% today, that is to say an abyss. This barometer is calculated according to the average interest rates applied by financial institutions with a third increase. This gives you the maximum rate that a bank can offer.
What about those who bought small credits?
Surely, these are the people who have the most to lose. The loan rates to which they aspire (credit on bank overdrafts for example) have not dropped by an iota. If we look at the attrition rate, borrowing rates have increased in recent years. At the end of 2015, for a loan of less than 3000 dollars, the usury rate was 19%. Nowadays, it is displayed at 21%. What makes an increase of approximately 5% in 5 years.
There you have the two extremes. In between, you have those who borrow from 3000 to 6000 dollars and who therefore benefit from the favorable economic situation. Indeed, a drop in interest rates of 10% is observed over a period of 5 years. At this point, it is therefore useful to note that those who bought mortgage loans take full advantage of the low interest rates.
Why so much difference on the type of loan?
Simply put, this is mainly due to the nature of the interest rate. This rate is proposed according to three essential criteria. First there is the cost of refinancing, the cost of risk and finally the management and distribution costs.
The cost of risk is measured individually according to the financial situation of the borrower. The main purpose here is to assess the risk that the client will default to the bank or the financial institution. This cost is high for consumer loans because of guarantees and borrower insurance requested from the client. The management costs constitute the additional costs linked to the loan dossier. They are greater on consumer credit than on home loans.