In practically every area of life you are offered financing by dealers, intermediaries and others. With such an installment loan, the acquisition costs are spread over a certain term, you pay constant monthly installments including interest. But whether an installment loan is always recommended depends primarily on the intended use. Also your occupational group has influence on the credit conditions. A loan comparison is therefore recommended.
How to find a favorable installment loan
Installment loans have the advantage that the underlying interest rate is fixed for the entire term. So you can use a loan calculator to calculate in advance how much borrowing will cost you in the end. Since this is extended without earmarking, you can use the money as you wish.
However, there are restrictions on the loan amount and the maximum term: installment loans are usually issued between 1,000 and 70,000 dollar, with terms between twelve and 120 months. You can find these choices in the comparison. However, before you take out a loan, you should correctly assess your actual needs. This will protect you from excessive interest charges and long-term commitments.
- Shorter terms reduce costs
The longer the term, the lower the monthly installment for the same loan amount. Conversely, this means a higher interest burden because you are only repaying the loan in small, even steps. However, also keep in mind that interest surcharges often apply to terms longer than 60 months. Borrowing becomes more expensive not only in absolute terms, but also in relative terms due to the higher interest rate.
- Reduce borrowing requirements through equity
Consider whether fixed-term deposits are not due soon or whether it is worth selling stocks from your portfolio. With all these means you increase your cash, consequently you need to borrow less.
- Arrange unscheduled repayments and installment breaks
If you ever have unforeseen larger amounts of money available, unscheduled repayments without an early repayment penalty are ideal for reducing the loan burden. Installment loans are so flexible that it is now even possible to take installment breaks without negative consequences. The banks then allow you, for example, to suspend a monthly installment once a year after prior notice. This means that you do not risk having to terminate the loan even if you have temporary payment difficulties.
- Check Schufa entries and have them corrected if necessary
The interest rate is generally dependent on your creditworthiness. SCHUFA score values, for example, which are recalculated at regular intervals, are decisive. The more data that is stored about you in Schufa, the better. Better in the sense that "credit histories" are already available about you and banks can assess whether and how you meet your obligations. Therefore, check by querying your Schufa data whether they are really correct: Once a year, you can request a "data overview according to § 34 BDSG" online free of charge and without consequences.
- Specify second borrower
As a young professional, it is worthwhile to include your partner or spouse as a second borrower. In this way, you improve your creditworthiness, increase your chances of being granted a loan and obtain more favorable loan conditions. This person must live in the same household as you - this must also be stated in the loan application.
Is an installment loan with earmarking more favorable?
The normal installment loan works without earmarking, you as a borrower can use the money as you wish. In certain cases, however, it is worth comparing earmarked loans, especially when buying a car and repairing and renovating real estate property. You can thus benefit from a lower borrowing rate in some cases. This has a positive effect on the total amount of the loan.
In the case of a car loan, the vehicle (used or new) is automatically loan collateral, regardless of whether it is a car loan or used car financing. You must submit the registration certificate Part II to the bank. The bank rewards you for the lower default risk with sometimes significantly lower interest rates. Conversely, you can act as a cash payer at the car dealer and negotiate price discounts.
Property owners can alternatively take out a modernization loan. You can provide proof of ownership by means of an extract from the land register or tax assessment notices and also receive preferential conditions here in the form of a classic installment loan. You have already fulfilled the purpose, i.e. "modernization of the property", with the proof of ownership. In fact, you can use the money as you wish.
If you work in the public sector or are a civil servant, you may also qualify for a low-interest civil servant loan. Due to the high income security of the borrowers, they can receive comparatively high loan amounts and agree on long terms. Interest discounts of up to 50 percent are possible. This special type of loan is available not only for installment loans, but also for a range of other earmarked financing.
Step by step to an installment loan
- Determine loan amount, term and intended use
In the first step, you set the loan amount and the term for the installment loan, and in parallel you select the intended use. In this way, you automatically benefit from a comprehensive comparison if, for example, installment loans with intended use are possible. The individual credit offers are now listed chronologically, with information on the monthly rate and the possible interest rates.
- Create budget calculation
Based on your everyday income and expenses, you now create a budget calculation, for example with our budget calculator.
- Compare offers
Now take the budget calculation at hand. How much credit, i.e. what monthly installment over what term can I afford for an installment loan? To do this, you can adjust the loan amount and term as you wish at the top with a click of the mouse. Make sure that the monthly installments do not exceed the available budget, which you have determined with the budget calculation.
- Submit credit request for installment loan
After you have decided on the desired loan offer, you must then provide personal information and information about employment in the credit application. One requirement is that the borrower must be employed outside of the probationary period and for an indefinite period. Alternatively, the term must not be longer than the fixed term. In the next step, you must also repeat part of the household calculation, the bank also sets lump sums per person in the household here.
- Accept written offer, carry out Postident
After submitting the loan application, you will receive the bank's written offer. Here, you will still have to legitimize yourself by means of Postident at the local Deutsche Post branch. Provided that all the required proof and documents have been submitted with the signed loan application, a Schufa query will be carried out.
- Disbursement of the loan
The loan is then paid out to the specified bank account within a few working days. Your installment loan is now available to you.