What is a installment loan for ? How is the application? What requirements do borrowers have to meet? What do the loans cost and what do you need to pay attention to in comparison? An overview of the most important features of installment loans.
Installment loans are annuity loans without earmarking
Installment loans are annuity loans without earmarking. The essential feature of annuity loans is the constant monthly installment, which includes interest and principal. Only the first or last rate may vary slightly in height. The interest rate is fixed for the entire term.
Unlike the annuity loans used for real estate financing, installment loans are not tied to a specific purpose. The loans can be used to finance consumption purchases, debt rescheduling, vehicles and any other projects. According to a study by the Bankenfachverband , 32% of German citizens used installment credit in 2016.
The loans are offered by numerous banks and can be requested online as well as in a local branch. Net loan amounts of approx . EUR 2,500-75,000 with a maturity of 12-120 months are customary in the market , whereby the maximum maturity of most providers does not exceed 96 months.
The key comparison criteria for installment loans are:
- effective interest
- acceptance criteria
- Conditions for special payments
- Additional services such. B. entitled to installment suspension
The effective rate of installment credit
The effective interest rate, according to the price regulation, must include all the costs associated with the credit. The effective interest rate is therefore the most important criterion for the comparison of installment loans. The amount of the interest rate depends significantly on the duration and creditworthiness of the borrower. At current market rates are interest rates of about 3-10%.
Some banks set effective interest rates based on creditworthiness. Then, the amount of net income, current loan commitments, employment status and SCHUFA scores will determine the conditions. Banks are required to provide representative interest rates and the total possible interest margin for credit-based loans.
If a bank uses the effective interest rate uniformly for all customers, this is clearer at first glance. However, this does not mean “gifted”: The credit is only given to those who have a sufficient credit rating . Lending against interest surcharges does not apply at uniform interest rates.
The acceptance criteria
With the acceptance criteria, a bank determines which requirements the applicant must meet in order for a credit commitment to be granted . Most banks require at least six months of permanent employment, net income starting at around € 1,100 (single persons without maintenance and credit obligations) and flawless SCHUFA information.
However, there are no uniform acceptance criteria: some banks also lend to the self-employed, sometimes lending is not excluded, even with completed SCHUFA entries (at higher interest rates).
Conditions for special payments
Borrowers can repay installment credits prematurely in whole or in part at any time. However, the bank may grant the right to a prepayment penalty in this case in the loan agreement. According to the law, this may amount to a maximum of 1.0% of the deferred balance. Many institutions allow free full and / or partial repayments.
Additional services for installment credit
Banks often apply for loans with additional benefits. Below are extras without real added value such. B. Bestpreisgarantien with right of return within the legally prescribed withdrawal period. Other additional services such. For example, a contractual entitlement to X installment payments per maturity year may be worth an interest surcharge.
If an initial redemption exposure of z. If, for example, six months have been agreed, the entire loan amount must be paid during this period. The additional interest can amount to several hundred euros.
What advantages does a installment loan offer?
Installment loans offer several advantages over other types of loans:
- The interest rate is fixed for the entire term
- The costs are significantly lower than z. B. in discretionary loans
- The monthly burden is easy to calculate
- There is no use
- From application to payment it usually takes only a few days
Loans with a fixed interest rate offer themselves at the currently very low level of interest rates because unlike loans with variable interest rates, such as disposition or frame loans, there is no interest rate risk here. The interest rates on installment loans are generally much lower than for credit and credit card loans. The monthly load is constant and therefore easy to calculate. The loans are free to use and available to most banks within 2-5 business days of application submission.
Are there any disadvantages compared to other loan types?
Assigned disposition and framework loans can be accessed at any time without request. In addition, amounts repaid are immediately available here as credit lines. Installment loans are somewhat less flexible compared to these loans. The interest rates are also higher than for mortgage-backed loans.
The conclusion to the installment loan
Installment loans are freely usable loans with a constant monthly installment and a fixed interest rate. The costs are usually low due to the low interest rates, but also depend on the individual’s creditworthiness. From application to disbursement, it rarely takes longer than a week.