Consumer Credit – What Does It Mean, What Distinguishes It?
Consumer loans are loans for private individuals. This article provides information on the costs, the application process, conditions for granting loans and other typical features of this type of loan.
Consumer credit according to BGB
Consumer credit is defined in § 491 BGB. Since March 2016, the legislature distinguishes between general-consumer loans and real-estate consumer loans.
General consumer loans
According to the German Civil Code, a general consumer loan is a “loan agreement between a lender and a consumer as a borrower”. Most loans granted by banks to private individuals are covered by this definition: installment loans, overdrafts , general loans and point-of-sale loans fall into this category.
Point-of-sale loans are consumer loans that are concluded directly in the trade – eg. B. in the furniture store, electronics market or at a car dealer. The loans are not given by the trade, but by banks and serve to finance a purchase.
Credit as well as disposition credit are credit lines that can be accessed at any time after grant. In contrast to discretionary loans but (usually monthly) minimum redemption of z. B. 3% of each open balance agreed. Framework loans are also used in connection with credit cards with installment payment function.
On the other hand, no general consumer loan agreements according to the German Civil Code are loans below EUR 200, loans with a low cost and a maximum term of three months, mortgage loans , employer loans and the real consumer loans defined in the BGB.
Real estate consumer loans
Real consumer loans have only been the subject of the BGB since March 2016 – as a rule, loans are still referred to as “real estate loans”. The loans are granted to consumers and either secured by a mortgage or a real burden or “for the acquisition or preservation of ownership of land, existing or to be built buildings or for the acquisition and preservation of real estate rights” (§ 491 BGB) used.
Important comparison features for consumer credit
Consumer credit is offered by countless banks, peer portals, peer-2-peer credit marketplaces and brokers. The most important comparison features are:
- interest rate
- Prepayment Compensation for Fixed Rate Loans
- Acceptance criteria and application process
- available options
- Implicit and additional costs
The lower the effective interest rate, the better
The interest rate must, according to the legal requirements, be stated as effective interest and include all costs directly related to the loan. The lower the effective interest rate, the better. The interest rate is based on maturity and creditworthiness.
Free early repayment
Discretionary and general interest loans with variable interest rates can be repaid prematurely at any time without a prepayment penalty – even partially. In the case of installment loans with fixed interest rates (including point-of-sale loans), banks may demand compensation of up to 1% of the prematurely repaid balance. If a bank waives that, that’s an advantage.
Acceptance criteria and application process
The acceptance criteria of a bank define the preconditions that a borrower must fulfill for a consumer credit. Permanent employees without negative SCHUFA entries have good chances. However, those who have several children with middle-income and / or have to serve existing loans can fall through the grid.
Recently, the number of banks has been growing with very fast and straightforward application processing. The bandwidth of processing times has grown. If you need to go fast, the combination of online application with instant confirmation, electronic proof of income, identity verification by video call and possibly also lightning transfer is helpful.
Installment credits are transferred to checking accounts, and disposition loans can be accessed via the salary account. Especially with credit lines, there are significant differences in the access options. Often, only transfers in favor of a reference account are possible, sometimes the credit line can also be used for transfers to any accounts and / or through card payments.
Implicit and additional costs
Additional costs can z. B. incurred for residual credit insurance. Consumer advocates often advise against policies, because protection against illness, unemployment and death can quickly become more expensive than the actual financing costs. If it is absolutely necessary to take out insurance, a monthly right of termination without cancellation deduction is advantageous.
Implicit costs may be incurred on so-called “0-percent financing”. These are often found in the car trade. The optically unbeatable interest often deceives: Who gets involved in the financing offer, waives discounts that would have been possible with a consumer credit.
Advantage: Fast and easy financing
Consumer credits enable the uncomplicated and quick financing of any project – such as car purchases, account balances or furniture purchases.
Disadvantage: financing costs are always incurred
In comparison to the disciplined saving of the required amount, the costs are higher due to the debit interest. At the current level of interest rates, however, the financing costs are not all that important.
Our conclusion on consumer credit
Consumer loans allow financing for any purpose. Possible are installment loans with a fixed interest rate and a constant rate as well as disposition and framework loans with flexible repayment. Financing costs are always incurred and are the essential comparison criterion.