For years, interest rates on consumer loans such as personal loans and revolving loans have been falling. Interest rates fell remarkably much in 2019, to a minimum interest rate of 3.9%. The reason for the continuing fall in credit interest rates is the fierce competition between the various lenders: if one bank lowers interest rates, the other automatically goes along.
Although the interest on consumer loans is not yet at such a bottom level as the mortgage interest rates (pay) and on the other side of the story the savings interest rate (received), many consumers still benefit considerably from the reduced interest rates.
The expectation is that in 2020 the interest rates on borrowing money will fall even further due to competition.
In this article we explain what you can expect from the interest rates and other conditions for consumer loans in 2020.
Continuous credit interest: an overview through the years
While the interest rate for personal loans has fallen steadily in 2019, that is a lot less so for revolving loans. A revolving credit is also known as ‘a dead-end credit’: the interest rates are variable, are higher and amounts withdrawn are available again after replenishment. A full repayment of a revolving credit plus interest becomes difficult for many people in this way, especially for the economically weaker households. After all, money is always available, but the interest rates are a lot higher and can vary; moreover, there is no fixed end date.
The interest on a revolving credit is higher, because an interest rate reduction has a huge impact on all revolving credit facilities that are currently running with a bank and an interest rate reduction of a variable interest rate therefore affects all customers with such interest and that costs the bank a lot of money.
This is different for a personal loan: a reduction in the fixed interest rate (associated with a personal loan) only affects new customers. Not on already existing personal loans: the interest is then fixed. In other words: not only for customers, but also for the banks themselves, revolving loans represent a higher risk than personal loans.
With personal loans, the interest rate has fallen considerably and with revolving loans therefore slightly. A large drop in interest would also not be fair to existing customers. Why should only new customers benefit from an interest rate cut? A possible interest rate reduction therefore applies to all customers with a variable interest rate (revolving credit).
To protect consumers from borrowing irresponsibly, the supply of revolving loans has fallen sharply. Consumers themselves are not too enthusiastic about this type of loan: less than 5% of our customers take out a revolving credit. This trend will certainly continue in 2020.
Below you can see how interest rates for revolving loans have developed in recent years:
Personal Loan: fixed interest rate always lower
It is possible that interest rates for personal loans will fall further in 2020. This applies to personal loans from 25,000 dollars, but also to the somewhat lower loans. Interest rates could fall even further with higher amounts because the fixed costs per contract of a loan with higher loans (from USD 15,000) weigh less heavily in the interest rate.
Borrowing money could therefore become even more affordable in 2020. The differences between lenders remain large, sometimes up to 4% interest rate differences between the cheapest and the most expensive loans. It is therefore always worthwhile to compare loans.
In order to make a good comparison, not only the level of the loan interest is important, but also the term of the loan and the conditions. Often the following applies: the lower the interest, the longer the term and the more expensive you are. So comparing well and setting priorities is the motto!
Personal loan: the benefits
95% of all consumers who borrow money from us choose a personal loan. That is not for nothing, because of all the loans available on the market, a personal loan offers the most financial security and benefits:
A personal loan offers one of the lowest interest rates in the the country: from 3.9% and this will be even lower in 2020.
- No unpleasant surprises await you:
the low interest rate is fixed throughout the entire term.
The term is also fixed: you know exactly in advance what you will pay and when you have paid off the loan.
- Fixed monthly charges.
- Additional repayments are always allowed and are free of penalties. If you have a financial windfall then it is wise to pay extra. This always saves you money, because a lower or no loan is always cheaper.
All in all, a personal loan is much wiser, cheaper and more responsible than a revolving credit. That is precisely why more than 95% of all our customers also opt for this loan form.