For almost 140 years, banks in Germany have been reputed to be the perfect partner for private individuals in matters of investments and financing. The installment loan was considered one of the best loan offers for the middle and lower classes on the German financial market at all. But in the years 2009 and 2010, the success story came to a sudden end. Lenders took over banks and replaced the traditional bank with the exception of one branch. With him also the installment credit disappeared from the face of the earth. The instant loan has followed its footsteps.
5 tips for the right installment loan
1. Short or long term: Available- vs. installment loan
Depending on whether your purchase just overextends your budget or whether this will be the case in the long term, it is worth considering which form of credit is the right one: overdraft or installment loan. An overdraft facility, ie an overdraft facility for a checking account, is often twice as expensive as an installment facility. Therefore, it is advisable in any case to check whether the account is now overdrawn for a longer period and it therefore makes sense to apply for an installment loan. Useful tip: If you use your overdraft facility on a regular basis anyway, rescheduling on a cheaper installment loan offers a lot of savings potential.
2. The tip of the balance: the condition comparison for the installment loan
If you have decided on an installment loan, it is always worth comparing the conditions of different institutes before applying. Some providers lure with an “asterisk offer”. This only applies to a restricted group of people with very good creditworthiness, a certain loan amount and term and is therefore probably a few percentage points from your current interest rate. In general, the interest quantifies the price of your loan. Always compare the effective annual interest rate: it includes all costs for the loan and is therefore the ideal basis for a quick comparison. Also pay attention to an identical term and loan amount when comparing different offers: This is the only way the comparison is meaningful.
3. Creditworthiness matters: the Credit Bureau Score
Most loans are credit-dependent: This means that the credit institution uses your personal data to determine the probability that you will repay the requested loan. As a rule, the bank receives the information for this via Credit Bureau (abbreviation for “Protection Association for General Credit Protection”). This credit agency collects the credit-relevant data of the Germans in order to make them available to banks and commercial companies. The higher your likelihood of repaying the loan and the lower the default risk for the bank, the higher your Credit Bureau score and the better your credit rating. Important: The higher your credit rating is, the lower the interest rate that is usually offered to you. It makes sense to regularly check and, if necessary, correct the data that Credit Bureau holds about you. You can arrange both on the Credit Bureau website.
4. Pay attention to the correct wording: Use “Inquiry loan terms”
Every credit request is forwarded to Credit Bureau. Too many inquiries have a negative impact on your score and thus on your credit rating. The reason: Credit Bureau then assumes that you make so many credit inquiries because you are always rejected. It is therefore important to explicitly advise the clerk to make a so-called “request loan terms”. Because this type of query is deleted after ten days and therefore does not affect your Credit Bureau value.
5. Everything at a glance: Plan your financing request realistically
Whether you or your customers want to buy a new car, finance a modern kitchen or plan a debt rescheduling – your loan amount and the monthly installment should be tailored to your life situation. Clean up and compare all your income and expenses. This is the only way to get a real picture. For example, when rescheduling a debt, it is important not only to replace the old loans, but also to take account of credit card debts and overdrafts. It is also important that you can pay the monthly installment over the entire term.