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Take Out Loan - The Best Tips For Borrowing!
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Before you take out a loan, it is worth comparing the providers and the offers. Where are the best offers? When is a loan worthwhile for me? What do I have to look out for in a loan? Everything you need to know about getting a loan can be found here.
Where can I get a cheap loan?
If you want to take out a loan, you should be informed and compare the many offers. The best way to do this is to use an online portal. There you can view a large number of offers and take out a loan online in the next step. This has a number of advantages:
Online comparison portals offer these advantages when looking for a cheap loan
- large selection of offers clearly presented
- Here you will find offers from branch and online banks
- Loan application can be easily submitted from home
You can easily take out a loan using our loan comparison. Here you get an overview of the current lending rates and reputable banks.
What do I have to look out for when I take out a loan?
Every lender wants to make money. This means that when a bank lends you money, you have to pay for it. So you not only pay back the loan amount, but always a little more. These are the lending rates. The level of interest can vary widely. This is why it is important to pay attention to the following basic factors when taking out a loan:
- the amount of the amount
- the term of the loan
- the appropriate purpose
- the difference between the borrowing rate and the effective rate
- the representative example in comparison
- the processing fee
In the following you will find explanations of the individual points.
Borrowing: What influence do the loan amount and the term have on the loan interest?
For a usual installment loan, the higher the loan amount, the higher the loan interest. If the amount is high, the lender runs a higher risk that the loan cannot be repaid. He can pay for that with higher interest. The same goes for longer loan terms. In most cases, the longer the term, the more you have to pay for the loan.
Can I get a cheaper loan with the right purpose?
Yes, a loan for a predetermined purpose is often cheaper than the same loan amount without a fixed purpose. This is because the bank has additional security with earmarked loans. With a car loan, the purchased car serves as security in case you can no longer pay the loan installments. In real estate financing, the house or apartment bought is used as security.
What is the difference between borrowing interest and effective interest?
The effective interest rate, also known as the annual percentage rate, includes all additional costs incurred when taking out a loan. These are, for example, administrative expenses or the costs of creating documents. The effective interest thus describes the total costs actually incurred and is higher than the borrowing interest. The debit interest, on the other hand, only indicates the interest that has to be paid purely for the provision of the loan amount. The following sample calculation shows the difference between the target and the effective interest rate for the best offer that two thirds of all customers receive.
Comparison of borrowing interest and effective interest rate for a loan of € 10,000
Borrowing rate Effective interest rate Loan amount € 10,000, 60 months term, monthly installment € 174.60, free use 2,95 % 2,99 %
Source :vergleich.de, Installment Loan Comparison (February 2020)
Even if the difference is only very small at 0.04%, this can amount to a few hundred euros with high loans. When comparing loans, it is therefore better to compare the effective interest rates. Then you have an overview of the actual costs.
What does the representative example show in the loan comparison?
The representative example must show the APR, the monthly rate and the costs that two thirds of the customers of the bank in question pay in an installment loan comparison. This information is required by law. This is to make it easier for customers to estimate the real costs of borrowing. This sample calculation gives more realistic values for the majority of borrowers than current offers from banks. In many cases, these are only given to a few interested parties under the very best of conditions.
Are there any processing fees when taking out a loan?
No. The lender is not allowed to charge any processing fees. Since October 2014, these have been prohibited by law following a ruling by the Federal Court of Justice.
The most popular loan types at a glance
There is a suitable loan for almost every situation in life. The different types of credit differ in the purpose and the conditions of the cash disbursement, which affects the amount of the loan, the interest rate and the term. This also makes sense, because it makes a clear difference why you want to take out a loan: for example, for a new car to finance your studies or because you want to buy a condominium.
The following overview shows you the most popular types of credit with their special features.
Installment loan - the classic type of borrowing
One of the most common types of loan is the installment loan, also known as consumer loan, which is granted for sums of up to € 50,000. More than every fourth adult in Germany has taken out an installment loan in their life. The loan amount is paid out in one amount and repaid in regular monthly installments over a fixed term. The lending rates are currently very cheap. In May 2020, according to the Deutsche Bundesbank, the average effective interest rate for consumer loans was 5.93%. With an installment loan comparison, you can easily compare the best offers from home and choose a suitable installment loan in peace.
Features of an installment loan at a glance:
- Convenient borrowing online with an installment loan comparison possible
- currently very favorable conditions
- Clear repayment that can be planned over the long term
Car loan - a loan with a special purpose
Do you want to take out a loan specifically to buy a car? Then a car loan is the right solution. A car loan is earmarked and in most cases up to € 50,000 is possible. You may only use the loan to buy a car, motorcycle or mobile home. It does not matter whether it is new or used models. Often the terms that you can find online in a car loan comparison are better than at branch banks.
Features of a car loan at a glance:
- cheap borrowing possible via a car loan comparison
- the loan is earmarked
- Most banks have an upper limit of € 50,000
Overdraft facility - the most expensive way to get a loan
Do you need money quickly and easily? Then a credit line is the first choice for many. With the overdraft facility, you can overdraw your current account and thus end up in the red. The overdraft facility is particularly interesting because there are no guidelines as to when it has to be paid back. It can also be easily set up in consultation with your bank. But it is very expensive with up to 13% interest. Often it is even advisable to reschedule the credit line with a cheap installment loan.
Features of an overdraft facility at a glance:
- easy to set up and no set repayment
- very expensive
- Risk of over-indebtedness with low income
Personal loan - borrowing from private individuals
You can decide whether to take out a loan from a bank or borrow money privately. A personal loan is a loan that a private individual gives to another person as a peer-to-peer loan. Most of the time, the loan is brokered via a platform, whereby the loan terms can be freely negotiated. The interest rate depends on the creditworthiness of the borrower and the desired return on the lender. If the credit rating is bad, the interest increases, but there is a chance of a loan even with a negative SCHUFA.
Features of a personal loan at a glance:
- is awarded by private individuals
- also possible with negative SCHUFA
- Interest rates are often higher than on installment loans
Instant loan - this makes borrowing particularly quick
You want to take out a loan but don't wait days for the approval and the money? Then an instant loan is interesting for you. You will receive an acceptance or rejection after just a few moments and, in the best case, the loan amount within a few hours. However, a positive SCHUFA score is necessary for this. The processing process runs with the help of fully digital processes that the bank uses. As a rule, the purpose of the loan is freely selectable.
Features of an instant loan at a glance:
- Processing and lending in a few hours
- positive SCHUFA score required
- Interest rate level comparable to that of installment loans
Take out student loans - if the BAföG is not enough
As a student or doctoral candidate, you can take out a loan that will finance your entire degree or a specific phase of your studies. A distinction is made between general student loans, education loans, education funds and special offers from universities or foundations. As a rule, student loans are paid out in monthly installments and not, as is the case with traditional installment loans, in a single amount. The repayment period often only begins after a transition period. This gives the borrower time to find a job and pay the loan installments.
Features of a student loan at a glance:
- only for students or doctoral candidates
- Payment in installments
- Repayment often only after a transitional period
Small credit - popular and cheap
A small loan is a normal installment loan that is concluded for a small amount. Since there is no clear definition, amounts between € 1,000 and € 10,000 are referred to as small loans. Small loans are popular in Germany, with almost 31% of all newly concluded loan agreements for less than € 3,000. They are often offered at low interest rates because the banks take less risk with small amounts. This enables quick repayment. For example, in our loan comparison you will find an offer for a loan of € 1,000 from OFINA, which bears 0.0% interest over a term of 12 months.
Features of a small loan at a glance:
- Loan amounts up to € 10,000
- favorable interest rates are possible
- Possibility of quick repayment
Mortgage lending - the dream of having your own four walls
Anyone who wants to build or buy a house needs a few hundred thousand euros for their construction financing. This is a special-purpose loan that is taken out for the acquisition, construction or renovation of a building. In many cases, the repayment runs over several decades. Building interest rates have been at a low level for several years. A high own contribution leads to better conditions for house financing. If there is little or no equity available, interest rates rise.
Features of mortgage lending at a glance:
How Much Credit Can I Afford?
Anyone who takes out a loan undertakes to pay the fixed monthly installments for the agreed term. Therefore, the loan rate is of particular importance. It should only be high enough that you can safely pay for it.
In this context, you should ask yourself in what period of time you can repay the loan: the shorter the term of the loan, and thus the repayment phase, the higher the monthly payments will be. To determine the loan installment that is appropriate for your personal circumstances, compare the monthly expenses with your income. This results in the possible burden for repaying a loan.
An example calculation: With regular income of € 2,500 and expenses of € 2,000, € 500 is free at the end of the month. If you subtract € 200 from this as a safety buffer, there is a possible installment charge of € 300 per month.
Loan Calculator: How Much Loan Can I Afford?
It is best to use a loan calculator online to get an overview of how the loan terms change with different framework conditions. With this tool you can change and try out the essential factors that influence the selection of a loan. In this way, you will get a feel for the terms and conditions of the loan, such as the interest rate and the size and duration of the installments, before you take out a loan.
How do you get a cheap loan? 4 tips for better interest rates
Do you want to take out a loan? Our tips will show you how you can get low interest rates and under what conditions the lender offers you favorable terms.
Tip 1: Wait for the right time for the loan application
Before granting a loan, a bank calculates the risk it is taking. It assesses your creditworthiness, the credit rating. For this purpose, she uses, among other things, your income and employment relationships. A permanent position with a regular salary has a positive effect. So if you are still in the trial period, just wait until it is over and you are taken on indefinitely. This increases your chances of lower interest rates. The same applies if, for example, you are about to finish your studies or training. If you wait to borrow before you start your job, you can secure better interest rates.
Tip 2: Check your SCHUFA score before taking out a loan
Before granting a loan, banks ask a credit agency, for example SCHUFA, about your financial situation. SCHUFA collects data on existing loans and debts. And it evaluates your creditworthiness with the help of a point system, the SCHUFA-Score. Unfortunately, it happens that this data is out of date or incorrect. It is therefore advisable to obtain information about your rating from SCHUFA before you take out a loan. You can do this once a year for free. If you discover errors there, request the deletion or correction of the information. In this way, you will improve your rating and increase the chances of better loan rates.
Tip 3: take out a loan for two
If you add a second person as an applicant, the available income increases. This in turn can have a positive effect on your creditworthiness and cause the bank to grant the loan on better terms. However, this only makes sense if the second person has a positive credit rating. Please note, however, that in this case both people are considered borrowers and therefore both are liable in the event of default.
Tip 4: present additional collateral for the loan
You can increase your credit score by providing additional collateral. This can be material assets such as existing jewelry, vehicles or life insurance. The lender can also take out residual debt insurance as security. Naming a guarantor can also be considered security and lead to more favorable terms when you take out a loan.
Take out credit via an online comparison - how does it work?
In order to take out a loan via an online portal, only a few steps are necessary,
- Step 1: Before you decide on a certain loan in an installment loan comparison, you have to determine the loan amount, the term and the purpose.
- Step 2: After comparing the different offers, click on the offer from the bank you want.
- Step 3: Then enter the required information about your personal situation and submit this loan request.
- Step 4: The selected bank will then send you documents containing all the information about the loan in black and white.
- Step 5: You then have the opportunity to clarify any open questions with a credit expert over the phone and to examine the documents carefully.
- Step 6: Then you sign the loan offer and send it back to the bank. To do this, you must identify yourself with the Post-Ident procedure at the post office or by video. Only now have you submitted a specific loan application.
- Step 7: It can take a few days for the loan decision to be made. Experience has shown that you will have the loan amount in your account after 1 to 2 weeks at the latest.
Tip: The first steps are free of charge, non-binding and have no effect on your SCHUFA score. Only when you have sent the signed loan application to the bank will the lender contact SCHUFA and check your creditworthiness.Until then, your request is SCHUFA-neutral.
Borrowing: What requirements do I have to meet?
In order to be able to take out a loan, you must meet certain requirements:
- You must be of legal age.
- Your main residence must be in Germany.
- You need a bank account in Germany.
- You must have an income (except for a student loan). Ideally, it is a regular income such as wages, salaries or a pension.
Checklist: These documents are necessary if you want to take out a loan
- Proof of income (copy of wage or salary slips, pension notification)
- Copy of the employment contract
- Bank statements from the last 4 - 8 weeks (copies)
- signed self-assessment with information on income and expenses such as maintenance obligations or existing loan installments
- Copy of identity card
- For self-employed and freelancers: income tax assessments, profit and loss accounts or expenses-surplus accounts
- in the case of debt rescheduling: contractual documents for the old loan, transfer authorization for the new lender
Important questions about borrowing
Before you sign a loan agreement and commit yourself to the long term, it is advisable to answer a few questions that come up frequently.
What does special repayment mean in a loan agreement?
A special repayment is the partial or complete unscheduled repayment of a loan. For example, if you have made an inheritance. The advantage of special repayments is that you can pay off your loan debt more quickly. On the other hand, the disadvantage is that the lender may charge a fee, the early repayment penalty. However, this must not exceed 1% of the amount paid early. But there are also banks that expressly allow free special repayments. This is then noted in the loan agreement. You should therefore carefully weigh up whether and when a special repayment is worthwhile for you.
When should I combine several loans into one cheap loan?
If you want to reschedule an existing loan, it can save you money. This works if the new loan has lower interest rates than the current one. The best way to do this is to calculate the cost of the old loan and compare it with the cost of the new loan. You can find cheap offers for rescheduling loans in a loan comparison. It is particularly useful to take out a loan for a debt rescheduling if you want to use it to replace an expensive overdraft facility.
Can I suspend the installments if I can no longer pay off the loan?
There are loan agreements in which the possibility of a break in installments is stipulated. Then you may suspend payment in installments for 1 or 2 months. The bank will defer the amount, which you will have to pay later. If this option is not stipulated, you are not entitled to a payment break. In the worst case, if you default on payment, you will receive a negative SCHUFA entry and the bank can terminate the loan agreement. Then you have to refund the full amount. If you are unable to do so, foreclosure can result. Therefore, an agreed payment break can be a useful addition to the loan agreement.
How do I recognize a reputable loan provider?
There are a few hallmarks by which you can identify reputable lenders:
- Transparent information on the company headquarters, management (imprint), business report
- Loan offer contains all relevant information about borrowing such as interest, monthly installment, borrowing interest, effective interest rate and total costs
- Lending only with credit check
- no upfront costs or processing fees
- Lender is a member of the banking association
- no representative visit
Does a death protection or residual debt insurance make sense for the loan?
You can also take out residual debt insurance in your loan agreement. With it you protect yourself if you get into trouble and can no longer pay the monthly installments. Possible reasons for this can be unemployment, incapacity for work or death (death insurance). These insurances only make sense when it comes to large loans, for example for a property. It is important to pay close attention to the insurance conditions so that the desired risks are really covered.
Can I take out a loan if I am unemployed?
It is difficult for the unemployed to get a loan. Banks are not allowed to seize unemployment benefits if loan installments are not paid. As a result, they lack the necessary securities. That is why you cannot apply for a loan without income. To many interested parties, a loan without SCHUFA appears to be an option for borrowing. These are special loans for people who have a low credit score. For example, if they are unemployed or already in debt. However, many offers for loans without SCHUFA are rated dubious by consumer advocates because they often contain hidden costs. In addition, loans that are granted without a SCHUFA query are usually more expensive than conventional installment loans.
When applying for a loan, please state all income that is eligible. This includes, for example, care allowance that you receive for caring for relatives. An income tax refund is also included. With these items, you will increase your annual income and receive a better credit rating when assessed by the bank, which means you can receive lower interest rates.
Our independent installment loan comparison helps you to realize long-cherished dreams - with the cheapest interest rates.
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