When making larger purchases, such as buying a house or building a home, one thing is particularly important: If you need financing, you need to know exactly what the bank is actually paying into your own account. This actual loan amount is the net loan amount. With it, borrowers can better plan their financial needs in the long term. It also indirectly shows what credit really costs and how far the loan has been repaid. In the guide we show how the net payment amount can be better used in practice.
What is the net loan amount?
The net loan amount is the amount paid out by the bank to the borrower after the contract has been concluded. As a rule, this is the financing requirement required by the bank customer for his investment. In most cases, the requested loan amount (gross loan amount) does not differ significantly from the net loan amount.
However, some banks charge processing fees. In addition, costs for residual debt insurance can arise. These amounts will not be invoiced separately, but will be offset against the amount paid out. Then the net loan amount is actually slightly less than the gross loan amount. In general, however, the net loan amount is fixed in the loan agreement and the amount is specified there. It is therefore advisable to choose the net loan amount as the personal financing needs actually are. The loan specialists at Across Lender are happy to help you find the optimal loan with the right terms.
What is the net loan amount used for?
The net loan amount is also important for calculating the interest, repayment plans and conditions of a loan. Because its height is the decisive factor. In this way, the agreed debit interest is separated from the net loan amount or determined as part of the loan rate. Other costs are also calculated on this basis. The net loan amount is also an important figure at the end of the loan term: __This is only considered to be repaid when the customer has paid back the full amount of the loan. __
The key figure therefore gives every borrower practical and useful information that they can count on. This makes it much easier for him to assess the current and actual total debt to a bank. It is also important information if the borrower is planning several other investments at the same time: for example, in addition to building a house, larger private purchases. With the net loan amount, he can better understand his financial capacities. On the other hand, banks prefer to use it to better assess the financial situation of the borrower.
Net loan amount and gross loan amount: what’s the difference?
If the cost of the loan is fully added to the net loan amount, this gives the gross loan amount. The costs include possible additional costs as well as the interest. Often there are additional processing fees or a required residual debt insurance. Both sizes can be easily calculated:
- Gross loan amount minus cost of loan = net loan amount
- Credit Cost = Gross Loan Amount Less Net Loan Amount
This rule of thumb also results from the difference between the two amounts: the smaller the difference, the cheaper the loan.
The net loan amount therefore has the following characteristics:
- what amount of money borrowers have actually applied for
- from the credit it is the actual amount paid out to the customer’s account
- it is more suitable for planning your own finances
- the net loan amount can be used to compare offers
The gross loan amount therefore has the following characteristics:
- it is the total amount of the loan
- it indicates how much money the borrower has to repay in total
- it contains the additional costs and interest of the loan
- the gross loan amount can be used to compare offers.
Calculate loans correctly with the net loan amount
Loan offers often speak of the total amount. However, this is not the amount that the borrower can dispose of. A calculation example for the installment loans that are used very often in everyday life shows it:
Sample calculation for an installment loan:
In fact, the customer receives only 40,000 dollars from the total loan amount of 44,600 dollars.
Tip: If you want to get a quick overview of the current conditions for an installment loan, you can start a free and anonymous comparison at Across Lender. The offers in the results list always contain information on the total amount of the loan. In this way, the appropriate offer can be determined based on the selected conditions.