The current low interest rate phase is a gift for borrowers. As a result of the financial crisis, the European Central Bank under Mario Drake has lowered its key interest rates drastically. Rarely have the interest rates been cheaper than in recent years! Before you decide on a loan, go through the following points in turn.
1. The amount of the loan
In many cases, the loan amount is insufficient. It requires an expensive refinancing. Expect more expenses from the beginning. If less money is needed, you may be able to repay the loan sooner. Of course, you should also consider your savings. The more money you have in the back, the tighter you can calculate.
2. Financial capacity
A loan is repaid in monthly installments. These should be able to serve them to avoid a debt trap. How much money is available to you each month? A single may be more generous than the family man. If you have two children, you can not just change the apartment for rent reduction.
Rule of thumb: About three net monthly salaries must be in reserve on your call money account.
The funding plan should include a longer illness or unexpected unemployment. With low installment loans, no such detailed planning is necessary. Here it is sufficient to roughly skip the financial conditions. If you already have several loans with expensive terms, rescheduling could be beneficial.
3. House bank or online loan?
In the store higher prices are required. The bank has to pay rent and staff, which does not apply on the internet. Thus, direct banks can offer more favorable interest conditions, from which you benefit as a customer. Some of them even advise you by phone to solve even complex credit issues.
Tip: In the end, the low interest rates speak clearly for the online loan.
The only advantage of a branch bank is a local contact, which you no longer need after graduation. Modern online banks can be reached almost around the clock while you need to make an appointment with the regional consultant.
4. The annual percentage rate
The effective interest rate indicates the total burden on the borrower. Therefore, this indicator is crucial for the choice of the loan.
Some chain stores try to lure advertisers with low offers, but caution is advised. Often this is an interest rate that is only granted to those with a high salary. When applying, criteria such as the Schufa score and the personal credit rating can have a negative impact on the annual percentage rate of charge.
The effective interest rate is made up of these factors:
– Processing fees
– Disagio (discount) and agio (premium)
– nominal interest rate
– Premiums and commissions
5. Duration of repayment
The term of a loan is up to you. Think about your financial circumstances: Extend the repayment to several years, the monthly burden is limited. On the other hand, the interest rates are a little higher than if you opt for larger monthly installments.
Try to pay off all debts until retirement. Focus on the term of long-term loans on the expected retirement date.
6. Smart fixed interest period
It pays to think about the fixed interest period. Within this period, the interest rate is fixed. That can be 5, 10 or 15 years. Depending on the offer shorter or individual deadlines are possible. In a low-interest phase, the longest possible fixed-interest period is recommended. If interest rates rise after a few years, take advantage of your cheap loan. The ECB is currently pursuing a policy of low interest rates, but that can change at any time.
If the interest rates are cheaper after 12 years, there is a simple way out: The legislature offers you the possibility of rescheduling. After 10 years you can get out of a loan without prepayment penalty. Since the bank can not do anything about it, because that is valid German law.
7. Additional special repayments
Longer durations should be associated with special repayments. These are payments that reduce the debt by up to 5 percent annually. This way, you can repay the loan more quickly so that you no longer have any debts. Whether you use this option is entirely up to you. If you have other expenses, you can waive the special repayment.
8. Save processing fees
Some banks charge up to 2 percent on installment loans. That does not have to be, because there are also toll-free offers. Alternatively, a pro rata reimbursement for early installment loan repayment is possible.
9. The best conditions
To get the right offer, you need to make a credit comparison. He helps you to find the optimal conditions. Important key figures are the loan amount, the repayment start, the terms and the amount of the monthly repayment installment. Always use the same ratios for a credit comparison.
Tip: As a basis, you should choose the effective interest rate because it includes all charges. Some banks advertise with low debit interest, but hidden ancillary costs may be included here.