Loan and loans you can also save on borrowing money. Every loan has its price, and there is an additional economic risk involved. Those who are fully informed can avoid many typical stumbling blocks from the outset.
MAKE A REALISTIC ASSESSMENT OF YOUR FINANCIAL SITUATION
Honestly check how much of the monthly income you can regularly set aside for instalments during the entire loan term without having to restrict yourself excessively! You should always factor in foreseeable reductions in your income and increases in costs. If despite good intentions, you have not yet managed to save a similarly high monthly savings rate – and not spend it again shortly afterwards – you should reconsider your monthly payment capacity. Think carefully about whether you need what you want to buy with the help of a loan immediately! Logical: if you save until you have collected the purchase price, you avoid the loan costs.
RECOGNIZE WARNING SIGNS
If the bank or savings bank denies you the loan you want, consider this a warning sign. Banks and savings banks also want to do business and do not deny a loan for anything. Be sure to question the reason for rejection and reconsider your economic situation!
AVOID CREDIT INTERMEDIARIES
Credit intermediaries charge a high commission. This is often not paid directly to the broker, but “co-financed” through the loan. This has disadvantages: In addition to the costs that the bank incurs for the loan, you pay interest on the agency commission. It is not uncommon for the interest of brokered loans to be relatively high.
Lure them into advertisements with “unbureaucratic, problem-free instant loans – even if the house bank causes problems”, special care is required. More and more often, these credit intermediaries do not even provide expensive loans, but instead, for example, “asset management” and similar contracts that are worthless to the loan seeker. Because the promised service – i.e. “debt settlement” or “debt management” instead of loan disbursement – is most expensive and does not help the debtor any further. For legal reasons, companies are usually not allowed to provide proper debt advice. Even if many intermediaries claim that the conclusion of further contracts (such as building society contracts, silent partnerships, various insurance policies) would allegedly make the granting of credit possible in the first place or significantly improve your chances, you should by no means get involved.
Particular caution is required if the alleged contract documents are also sent to you as expensive cash on delivery item. Usually, instead of the promised loan agreement, the eagerly awaited envelope only contains worthless papers or a request to submit further documents; the high fee is gone, and a later loan disbursement is highly questionable.
BE CAREFUL WITH RESCHEDULING
Beware of loan offers that are only granted on condition that all old liabilities are discharged. The melodious prospect of only paying one instalment can cost you dearly, even if it may even reduce the monthly burden of rescheduling and consolidating your liabilities. Usually, this is only possible by extending the loan term.
The actual profitability of a debt rescheduling can only be assessed by comparing the total burden of the debt rescheduling loan with the outstanding instalment obligations for the remaining loans plus the total burden for an additional loan requirement.
COMPARE THE PRICES
Compare the prices of as many credit institutions as possible. You shouldn’t be blinded by small monthly payments. The only meaningful information is the effective annual interest rate, which the banks are legally obliged to disclose. Almost all costs are allocated over the entire term. Make sure you also take into account and question special costs that are not included in the effective annual interest rate (for example, a voluntarily concluded residual debt insurance). You should only compare instalment loans with fixed terms.
It is true that the effective annual interest rate is usually lower for instalment loans with variable terms. However, variable conditions harbour a risk, especially if the general interest rate level rises. Many banks now advertise with interest rates “from” …%, whereby the criteria for the individual loan interest are very different. Sometimes the actual interest rate depends on the loan term, sometimes on the loan amount and often on the so-called creditworthiness (creditworthiness) of the borrower, which each bank also assesses according to its own criteria.
In order to find the offer that is most advantageous for you, you have to compare different, individually tailored conditions. Make sure that the maturities are the same; otherwise, the indication of the effective annual interest rate is not very meaningful for comparison. And don’t let yourself be put under time pressure: Assert your right to receive a draft contract so that you can read it in peace and then make your decision.
BEWARE OF PARTICULARLY FLEXIBLE LOAN TYPES
The offers are often only tempting at first glance: You are granted a high credit line, which, similar to an overdraft facility, you can usually use several times. You can also choose the monthly rate yourself to a certain extent, which gives the appearance of particularly great financial freedom. However, there are serious disadvantages: The minimum rate can climb when interest rates rise, because, in contrast to the instalment loan, you have agreed on a variable interest rate. If the rate remains the same despite the increase in interest rates, the repayment of your loan will take significantly longer. Interest rates that look particularly cheap at the beginning quickly lose their appeal when you see from the small print that this promotional interest rate is only valid for one or two months and then, of course, is “adjusted” to market developments. Since the interest, charge is determined monthly or at the end of the quarter, it is easy to lose track. You neither know how long you will have to pay back the loan, nor how expensive the financing is overall. If you keep exhausting the limits, the loan history will become more and more obscure.