The interest consists of:
- Funding costs : the costs that we pay to our lenders. This allows us to purchase the money that we lend to you.
- Risk costs : the costs that we incur to cover the credit risk. This is the risk that we run that customers will not pay us back. The level of this risk differs per customer and depends on various factors, such as the term of your loan, the loan amount and the sector in which you work.
- Profit storage: the compensation for our parent company. We owe this compensation for making capital available.
- Our costs for operational management (including personnel costs, IT costs and the reimbursement for third parties (including car dealer companies).
If one of these parts changes, we can change the interest. The most important variables are the funding costs and the risk premium. This is explained below.
A revolving credit is a flexible type of loan. You can withdraw money at any time (of course up to the agreed credit limit) or pay off. It is even possible to terminate your revolving credit at any time free of charge.
The flexible nature of revolving loans leads to variable funding costs. This means that for revolving loans we always have to raise money on the money market for short periods. This entails higher costs.
The level of funding costs that you pay mainly depends on two factors:
- the base rate on the money market
- the liquidity surcharge
We raise money on the interbank money market. In addition to a basic interest rate (a weighted average of the one, two and three-month Euribor rates), we also pay a liquidity surcharge for these. This liquidity surcharge is higher for loans of low quality than for those of medium or high quality.
The higher the base rate or the liquidity surcharge, the higher our funding costs. An increase in funding costs therefore also means that the interest on your loan increases. And vice versa: the lower the basic interest rate or the liquidity surcharge, the lower our funding costs and the lower the interest rate for your loan.
The risk premium that we charge you depends on the credit risk that we run when granting a loan. For the assessment of the credit risk, your personal financial situation and your family situation are important. Based on this, you will be classified in a certain class at the time of the credit application.
This has to do with the risk that we run that you would not repay your loan. In addition, the amount of the risk premium depends on the amount of the loan granted.
What does an interest rate change mean for me?
The monthly installment of a revolving credit consists of a fixed amount in interest and repayment. Within this fixed monthly period, the amount that you pay in interest and repayment varies.
If the interest rate goes up, you pay more interest and less repayment. This makes the duration longer. With a lower interest rate you pay less interest and you pay more. The duration is therefore shorter. The total monthly amount always remains the same.
The interest rate with a personal loan does not change during your agreement.