Installment loans are an integral part of consumption. The QueryBank was at that time the first installment bank and cooperated since 1954 with the mail order company Zwelle under the name Que Zwelle.
The way to the bank for many customers was a Canossagang in the past, installment loans today are a product that has to be sold. The bankers on the ground are under massive selling pressure, the online providers are conquering more and more market share. This is not surprising, as a credit comparison makes it clear how far the interest margin, and thus the savings potential, diverge.
Installment credit comparison currently
- The current installment loan interest rates for Germany in comparison.
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What exactly is an installment loan – the legal basis
Many account holders have a discretionary credit. This is given to them informally by the bank, the credit line is based on their credit rating. There is no written agreement. The customer can use the loan but does not have to. If the creditworthiness of the account holder deteriorates, the bank may reduce the disposition or terminate it entirely with an appropriate lead time.
A installment loan is equipped with a fixed, constant interest rate. The term is contractually regulated. The borrower pays a steady rate to the bank every month. The first and last installments may be different. Current installment loan interest rates can be found at the top of this page in our installment loan comparison.
The collateral for a installment loan usually takes place through a salary assignment. All these factors are recorded in the loan agreement. In addition, the loan agreement must contain further details, which the Paragraph 492 BGB requires.
Paragraph 491a BGB explicitly deals with consumer loans. Such a loan is when the lender commercialises loans and the borrower is a private individual.
Conditions of the bank
Before the signing of the contract, the lender takes precontactual notification. That is, if he agrees to the loan, he must notify the customer before signing
- The name and address of the lender,
- The type of loan
- The annual percentage rate,
- The net loan amount,
- The borrowing rate,
- The contract period,
- Amount, number and maturity of each installment,
- The total amount,
- The terms of payment,
- Any other costs, in particular in connection with the payment or use of a payment authentication instrument, with which both payment transactions and withdrawals can be made, and the conditions under which the costs may be adjusted,
- The default interest rate and the manner in which it may be adjusted and any delay costs
- A warning about the consequences of non-payments,
- The existence or non-existence of a right of withdrawal,
- The right of the borrower to repay the loan early,
- The rights resulting from § 491a (2) of the Civil Code, the rights resulting from § 29 (7) of the Federal Data Protection Act.
The selection – without credit comparison a hopeless venture
Never has the cost of applying for installment credit been lower than it is today. An installment loan comparison first provides information about which bank charges which interest. Cheap installment loan interest rates are usually the most important selection criteria, but there are still others:
- Does the bank allow for free special repayments or full early repayment of the loan without prepayment penalty?
- Are installment breaks contracted or individually agreed?
- Can the loan term be chosen steplessly, for example by entering the desired rate, or are there only rigid sections?
- Can the loan amount be freely chosen, or are only 1,000, 500 or 100 Euro steps possible?
- Does the bank accept self-employed as a borrower?
- What is the longest possible repayment term?
These questions may limit the number of potential lenders. Those who want to “walk” on the way to compare offers, will quickly realize that this is a hopeless task. Credit comparisons provide the optimal starting point.
The amount of the interest depends in most cases on the creditworthiness of the applicant, in some cases also on the term of the loan. For this reason, interest rates are usually quoted in a certain range.
According to the Price Indication Regulation, certain points must be given when advertising a loan. For example:
In addition to the bound debit interest must also be called the annual percentage rate. An example of how to set the maximum interest rate within the range that two-thirds of borrowers must pay for is an example. In the example above, this is 4.99 percent effective interest per year. The closer the two-thirds interest is to the lower interest rate, the higher the probability that one will settle there as well.
Effective interest rate
The bound debit rate may be nice and good, but only the annual percentage rate makes the cost of a loan directly comparable. Until the supreme court ban on closing the lending rates, the discrepancy between the borrowing rate and the effective interest rate was much higher.
Today, only the amortization settlement actually plays a role. The monthly installment consists of the interest rate for the remaining debt and the repayment portion. However, most of the banks only bill the repayments made during the year until 31.12. one year. This means that from January to December, the borrower pays interest on the remainder of the debt of 1 January of each year. If the repayment settlement were made monthly or quarterly, the respective APR would be lower.
Loans with earmarking – often lower interest rates
The most widely used installment loan with earmarking is probably the car loan. A comparison shows that interest rates on auto loans are generally cheaper than interest on loans with free use.
The background is the usability of the collateral. If a borrower is in arrears with a car loan, the bank can recycle the car and pay at least part of the outstanding debt. In the case of financing a holiday trip this is not possible. Banks pass on this advantage of easy usability to borrowers in the form of lower interest rates.
Another option is residential loans. These are only given to property owners for renovation or refurbishment. Despite the waiver of a land charge order, interest rates are at a lower level than normal installment loans.
Credit check – different weights at the individual banks.
Banks assume that part of the loans will not be repaid. As part of the credit check, they determine how high this likelihood is for the individual borrower. The final interest rate reflects the credit default probability. Bases for the credit check are
- private credit Scoring
- marital status
- Financial conditions
Add to that the socio-economic data. These include, inter alia, the place of residence. The common feature of this data is that the borrower has no control over this. If above-average loans have not been repaid in the vicinity of their place of residence, for example in the street or in the postal code area, this reduces their creditworthiness.
The credit check for a installment loan today falls under the term “industrialized credit process”. The entire process is digitized. There are interesting effects. A father of two, working in the construction industry, with no vices, generally has a poorer credit rating than a game-hungry, solitary official. Why? The married family man could be divorced, the then due maintenance payments jeopardize the loan. Jobs in the construction industry are considered relatively uncertain, certainly more insecure than the civil service. Gambling addiction interests the computer relatively little.
Private credit neutral query
The institutes weight the individual data differently. It can therefore happen that the cheapest bidder on the paper offers a less favorable interest in the individual case, than that in the ranking on two or three placed institution. Against this background, it is important to start a credit inquiry with all eligible banks. This costs only a few minutes and is as condition inquiry completely private credit-neutral.
Only when all tenders are available (usually within a few minutes of submitting the request) is it possible to compare in detail which bank comes closest to meeting its own requirements, both in terms of interest rates and in terms of general conditions.
Loan application online
Applying for a cheap installment loan today is conveniently done online from home. Anyone who finds online an offer of his house bank around the corner, but must be careful. If he goes to the branch for the loan application, he pays a higher interest rate there than with a degree on the Internet. As a rule, the applicant will receive the application documents, including General Terms and Conditions and Product Information Sheet, immediately after application by e-mail. Now it is necessary to complete these, to sign them and to return them with the necessary documents, copies of the bank statements and the salary certificate according to the bank’s instructions.
Legitimation & Video Ident
A borrower has to legitimize himself to the bank. This is difficult for a direct bank. He now has the option of either returning the documents as part of the PostIdent procedure. The legitimation takes place in the post office. Or, if available, he chooses the VideoIdent method. This requires a terminal with video and voice function. The identification takes place during a video chat. In this case, the applicant sends the documents to the institute without further ado.
In the meantime, some banks are also offering to deliver the documents digitally. An electronic signature and thus the fully digital application process is so far but very little common.
The faster the applicant ultimately returns the documents, the sooner, usually after two to three days of receipt by the bank, he may dispose of his credit.