The European Central Bank (ECB), at its meeting last Thursday, decided to raise its interest rates from 0.5% to 1.25%, an increase that adds to the one carried out in July (from 0% to 0.5%). The objective of this measure, according to the declarations of the president of this organization, Christine Lagarde, is to contain the very high inflation suffered by the countries of the eurozone, which in August reached a record of 9.1%.
The new increase in rates by the European Central Bank will, in all likelihood, make loans granted by banks and other financial institutions more expensive. Therefore, the measure will also harm those who need to finance a personal project, such as buying a car or renovating a home. According to the analysts of the loan comparator HelpMyCash.com, the forecast is that banks will raise the interest on their consumer loans in the coming months, so it is advisable to request financing before that increase materializes.
It is easy to understand why the measure adopted by the ECB will increase the price of personal loans. The interest that the European Central Bank has raised is the one that applies on the credits that the banking entities of the continent request. As the banks will pay more to finance themselves from now on, they will apply higher rates on all their loans; also those granted to finance private projects.
In fact, loans for personal projects already became more expensive when the European Central Bank raised its rates in July. The average equivalent annual rate of these products, which reflects their interest and their other expenses (such as commissions), stood at 7.67% in June, according to the Bank of Spain. A month later, after the measure taken by the ECB, this indicator shot up to 7.94%; the highest value of the year.
It should be noted, however, that not all financial companies will immediately make their personal loans more expensive. According to HelpMyCash, there will be entities that will postpone raising their rates for a few weeks to differentiate themselves from the competition and attract customers, which is a policy that several lenders already followed in July.
For example, entities such as Cofidis or Bank Norwegian still offer the same conditions as before the July rate hike. The interest of the Cofidis Personal Loan is maintained from 4.95% TIN (5.06% APR), while the minimum interest of the Bank Norwegian Personal Loan is still 5.99% TIN (6.16% APR) .
Those who need to finance a personal project, therefore, can still find consumer loans with attractive conditions. However, it is advisable to process the application as soon as possible, because it is a matter of time before the Spanish lenders increase their interest to conform to the new monetary policy of the European Central Bank.
Before processing your request, yes, the applicant must ensure that they can pay the credit. In a context of economic uncertainty such as the current one, it is not advisable to go into debt if you do not have a solvent profile. In case of having problems repaying the money, the borrower will run the risk of suffering penalties (interest and late fees) and even of seeing their present and future assets seized: their accounts, part of their salary...
According to HelpMyCash.com, it is only advisable to take out a loan if you have a stable job. In the case of wage earners, this means having an indefinite contract, while for the self-employed it means having a sustainable business with some seniority. In addition, the applicant must be able to pay the credit installments and their other debts with a maximum of 35% of their net monthly income, which is the maximum debt ratio recommended by the Bank of Spain.
