Consumer loans can be a useful tool when you need extra financial flexibility – whether it’s consolidating expensive small loans, covering unforeseen expenses, or financing a larger project. At the same time, consumer loans are one of the most expensive loan products in Norway, and the difference between the lowest and highest interest rates can amount to tens of thousands of kroner over the loan’s repayment period. The answer is not just about choosing the right bank, but about understanding how interest rates are set, and how you can use the competition to your advantage. An easy way to do this is to compare consumer loans at Axo Finans, where you can receive several offers at the same time and choose the lowest interest rate.
Why can’t you trust banks’ advertised loan rates?
When you visit a bank’s website, you often see advertisements with texts such as “interest rate from 6.9%” or “low interest rate on consumer loans”. This may give the impression that you can easily get a loan with very low interest rates, but the reality is more complex.
What does it mean that loan interest is individual and not fixed?
Most banks operate with individual interest rates on consumer loans. This means that the interest rate is not fixed for all customers, but is calculated based on your personal financial situation. Banks’ advertised interest rates are just one example, often based on the most creditworthy customers.
It is therefore quite possible that you will end up with an interest rate that is 5-10 percentage points higher than what the bank advertises. For example, a bank may show “from 7%” but offer you 15% because you have a lower income, short credit score, or high debt-to-income ratio.
What 5 factors determine your personal loan rate?
When you apply for a consumer loan, the bank assesses the risk that you will not repay. This risk assessment determines what interest rate you get. The five most important factors are:
- Credit score: A high score means low risk and lower interest rates.
- Income: The higher and more stable your income, the better the interest rate you can get.
- Debt-to-income ratio: If you already have a lot of debt, the bank sees you as a greater risk.
- Age and place of residence: Some banks take into account your age and where you live as part of statistical models.
- Loan amount and repayment period: Smaller loans and shorter repayment periods often result in lower interest rates.
Why don’t the banks’ websites show the interest rate you actually get?
The interest you receive will only be calculated after you have submitted a full application with a credit check and documentation. Before that, the bank does not know enough about you to be able to set a specific interest rate.
Thus, marketed interest rates are only indicative – intended to entice applicants. It is only when you receive a personal loan offer that you know what the loan will actually cost you.
How does the number of loan offers affect the final interest rate you receive?
One of the most effective ways to lower the interest rate on consumer loans is to apply to several banks at the same time. Each bank evaluates your application slightly differently, and the competition between them pushes prices down.
How much lower interest rate do you get by comparing 5 banks against 1 bank?
Several Norwegian surveys and data from loan intermediaries show that customers who compare several loan offers often get 1–3 percentage points lower interest rates than those who only apply to one bank. It can amount to large sums of money.
for instance:
- Loans of NOK 150,000 over five years.
- Interest rate from one bank: 15%.
- Interest rate after comparison via five banks: 12%.
The difference of three percentage points gives you about NOK 6,000 in savings per year, or over NOK 30,000 in total.
Why does interbank competition give you better terms?
Banks are competing for the most attractive customers. When several banks know that you are comparing offers, they will often go a little further to win you over as a customer – either with lower interest rates, lower establishment fees or better terms.
This is exactly the same mechanism as in the insurance market: more offers mean stronger bargaining power and lower prices.
Are comparison platforms more effective than applying directly to banks?
Applying to many banks individually can be time-consuming. Each application requires the completion of forms, documentation and credit checks. That is why loan intermediaries and comparison services have become so popular in Norway.
An intermediary like Axo Finans forwards your application to several banks at the same time, and you receive several personal offers at once. This saves time – and increases the chance of the lowest possible interest rate.
According to updated figures, the average interest rate on consumer loans via Axo Finans is lower than the national average interest rate, which shows that comparison services actually work. You can check the exact numbers on their website.
What does the difference in average interest rate prove about the effect of the comparison?
When the average interest rate at an intermediary is lower than the market average, it means that users actually achieve better terms. It shows that banks are willing to cut interest rates in order to win customers in competition with others.
This gives you as a borrower a significant advantage. Instead of accepting the first offer you get, you can compare, evaluate and choose the one that suits you best – whether you want the lowest possible interest rate, high flexibility or fast payout.
How to find the cheapest consumer loan – step by step
- Map out your needs. Do not borrow more than necessary, and always consider whether refinancing existing loans may be a better option.
- Improve your credit score. Pay bills on time and reduce debt to achieve better rating.
- Use a comparison service. Get more quotes without having to manually apply to each bank.
- Consider the total price, not just the interest rate. Establishment fees and instalment amounts affect the effective interest rate.
- Choose the right repayment period. A shorter repayment period results in a lower total cost, even if the monthly amount is higher.
How to get the lowest interest rate in practice
Consumer loans can be both useful and safe – if you proceed in the right way. The biggest mistake many people make is to think that the banks’ advertisements show what they actually get. The truth is that the interest rate is unique to each customer and that you need to compare several offers to find the best price.
Comparison services such as Axo Finans make the process simple and safe, and the results show that competition between banks works. By taking a few minutes to compare, you can save thousands of dollars – and get full control of your finances.
The cheapest interest rate is not the one you see first, but the one you find by comparing smartly.
