SUNDAY, AUGUST 1, 2021
Credits and loans: There are savings to be made on money lending too
Every loan has its price, and it carries an additional economic risk. Those who inform themselves comprehensively can avoid many typical stumbling blocks from the outset.
Realistically assess your financial situation
Honestly check how much you can regularly fork out of your monthly income for installments throughout the entire loan term without having to restrict yourself excessively! You should also always factor in foreseeable reductions in your income as well as increases in costs. It is also advisable to take into account the formation of reserves. If, despite good intentions, you have not yet managed to set aside a similarly high savings rate each month - and not spend it again shortly afterwards - you should reconsider your monthly installment load capacity.
Think carefully about whether you really need what you want to purchase with the help of a loan right away! Logical: If you save until you have the purchase price together, you avoid the loan costs.
Recognize warning signs
If the bank or savings bank refuses you the loan you want, consider this a warning sign. Banks and savings banks also want to do business and will not refuse a loan without a reason. However, be sure to question the reason for refusal and reconsider your financial situation!
Avoid credit brokers
Credit brokers charge a high commission. This is often not paid directly to the intermediary, but “co-financed” through the loan. This has disadvantages: In addition to the costs incurred by the credit institution for the loan, you pay interest for the agent’s commission. Not infrequently, the interest rates of brokered loans are also comparatively very high.
If they lure in announcements with “unbureaucratic, problem-free Sofort-Krediten, - even if the house bank makes problems”, completely special caution is required. These credit mediators mediate ever more frequently not even expensive loans, but instead for instance “fortune administration” and similar contracts, which are worthless for the loan-looking for. This is because the promised service - i.e. “debt settlement” or “debt management” instead of loan disbursement - is mostly expensive and does not help the debtor. For legal reasons, the companies are generally not allowed to provide proper debt counseling.
Even if many intermediaries claim that the conclusion of further contracts (such as building society savings contracts, dormant holdings, various insurance policies) would supposedly make the granting of the loan possible in the first place or significantly improve your chances, you should never get involved in this.
Quite special caution is required, if the alleged contract documents are sent to you also still as expensive cash on delivery. In most cases, instead of the promised loan agreement, the eagerly awaited envelope contains only worthless papers or a request to submit further documents; the high fee is gone and a later loan disbursement is highly doubtful.
Beware of debt rescheduling
Distrust loan offers made only on the condition that you pay off all old debts. The euphonious prospect of paying only one installment can cost you dearly, even though the monthly burden may even be reduced by rescheduling and combining your debts. In most cases, this is only possible by extending the term of the loan.
The actual profitability of a debt restructuring can only be assessed by comparing the total burden of the debt restructuring loan with the outstanding installment obligations for the still existing loans plus the total burden for an additional loan requirement.
Compare the prices
Compare the prices of as many credit institutions as possible. You should not be blinded by small monthly installments. Only the effective annual interest rate, which the credit institutions are legally obliged to state, is meaningful. It includes almost all costs over the entire term of the loan. It is essential that you also take into account and question any special costs that are not included in the APR (for example, residual debt insurance taken out voluntarily). You should only compare installment loans with fixed conditions.
It is true that the APR is usually lower for installment loans with variable terms. However, variable terms carry a risk, especially if the general interest rate level rises. Many banks now advertise interest rates “from” … %, although the criteria for the individual loan interest rate vary widely. Sometimes the actual interest rate depends on the loan term, sometimes on the loan amount and often on the so-called creditworthiness (credit standing) of the borrower, which each bank also assesses according to its own criteria.
In order to find the most favorable offer for you, you must therefore compare various conditions that are individually tailored to you. Make sure that the terms are the same, otherwise the APR is not very meaningful for a comparison. And don’t let yourself be put under time pressure: Assert your right to receive a draft contract so that you can read it at your leisure and only then make your decision.
Beware of particularly flexible loan forms
Offers are often only tempting at first glance: You are granted a high credit line, which you can usually draw on several times, similar to an overdraft facility. You can also choose the monthly installment amount yourself to a certain extent, which gives the impression of particularly great financial freedom. However, this is countered by serious disadvantages: The amount of the minimum installment can climb as interest rates rise, because unlike an installment loan, you have agreed on a variable interest rate.
If the rate remains the same despite an interest rate increase, it will take significantly longer to repay your loan. Interest rates that look particularly favorable at first quickly lose their appeal when you realize from the fine print that this promotional interest rate is only valid for one or two months and will, of course, be “adjusted” to market developments afterwards.
Since the interest charge is determined monthly or at the end of the quarter in arrears, it’s easy to lose track. You don’t know how long you have to repay the loan, nor how expensive the financing is overall. If you keep exhausting the framework, the loan process becomes increasingly opaque. A framework loan is often the entry into permanent indebtedness or even over-indebtedness, especially if you also use the normal overdraft facility on your checking account.
Beware of loan combinations with endowment life insurance policies
Loan offers in which the loan is to be repaid at the end of the term (usually after twelve years) via an endowment life insurance policy taken out at the same time are usually much more expensive than a comparable installment loan with pure term life insurance. The disadvantages are obvious:
The agreed variable interest rate causes the installment amount to climb as interest rates rise.
You pay the insurance premium in addition to the monthly interest installment for the loan.
The interest is calculated over the entire term from the original loan amount, as no repayment is made in the meantime.
The loan is not repaid until the end of the term - usually after twelve years - via the maturity benefit of the insurance. The bank therefore receives a large part of the accumulated insurance sum to repay the loan. If the maturity benefit is not sufficient to repay the loan in full at maturity due to poor performance of the profit participation, follow-up financing may be required. This means that you cannot be sure that you will actually be able to repay the loan in full at the end with the insurance sum saved.
The loan relationship usually lasts for twelve years. Over such a long period, it is difficult to plan your own financial resilience.
Consider carefully whether you really need residual debt insurance
The term “residual debt insurance” refers to term life insurance, the sum insured of which is usually adapted to the planned course of the loan and which is intended to cover the outstanding residual debt in the event of the death of the insured borrower. Frequently, other additional insurance policies are also taken out - such as for incapacity to work, accidents and unemployment.
The advantages of these well-sounding insurances are smaller than one might think. A critical look at the fine print often quickly reveals that the insurance benefits are rather questionable just when you need them.
In addition, the insurance policies offered by the lender are rarely particularly favorable. Moreover, the insurance premium is usually charged as a one-time premium for the entire term of the loan when the contract is concluded and is usually co-financed via the loan, just like the agent’s fee. So here, too, you have to pay additional interest.
If the bank insists on the conclusion of a residual debt insurance policy, it is legally obliged to include the insurance costs in the APR. Only if the contract is concluded at your request may the bank disregard the insurance costs when calculating the APR. If you can prove with the help of an uninvolved witness (who is not a co-borrower) that you would not have received a loan without taking out insurance and the bank still did not take the costs into account in the effective interest rate, you have a good chance of enforcing an interest rate reduction as a legal sanction for misrepresentation.
It is often more favorable than taking out a new residual debt insurance policy and financing the premium via the secured loan if you can offer an existing term life insurance policy as collateral or at least obtain a favorable policy by comparing prices from different providers.
Never sign in blank
Only sign a loan application if it is completed in full and you can see your entire repayment obligation. Do not leave anything to chance and make sure that all information about your economic situation and other loan obligations (the so-called economic self-disclosure) is complete and absolutely correct. Embellishments or forgetfulness - even if they are suggested by the bank employee or a loan broker - can take revenge at the latest when payment problems arise, if the bank accuses you of fraudulent intent here. You are responsible for these statements with your signature. Therefore, always obtain a copy of the loan application, the repayment schedule and your self-disclosure immediately.
Revocation of the loan agreement
If, in retrospect, you start to wonder whether the decision to take out a loan was the right one, you can revoke the loan agreement within 14 days in accordance with the US Civil Code. The period does not begin until the contract has been concluded, you have received all the necessary contractual documents (§ 356 b BGB) and these contain the legally required information (also for revocation). The revocation is made by a declaration to the lender. It does not have to be substantiated and can be made, for example, in writing or in text form (i.e. by fax or e-mail). To meet the deadline, it is sufficient to send the revocation in good time, which you must prove in the event of a dispute. A registered letter or a registered letter with advice of receipt has a higher probative value than the confirmation of dispatch in the case of an e-mail.
If several consumers conclude a consumer loan agreement as borrowers with an entrepreneur as lender, each of them can independently revoke his declaration of intent to conclude the loan agreement. If you revoke the contract after the loan has already been disbursed, you must repay the loan amount within 30 days of sending the notice of revocation. Even if you do not pay within the deadline, the revocation remains effective. In this case, you will automatically be in default after the 30 days. This means that from this point on, the lender can claim default damages on the entire debt amount instead of the contractual interest. In addition, there may be collection costs / costs of legal action. Failure to repay (on time) can therefore be expensive and - due to the possibility of negative Schufa entries - also lead to a significant deterioration in creditworthiness.
If you repay the loan in full within 30 days of revocation, the lender may additionally charge the contractual interest for the period between revocation and repayment. This amount is therefore “on top”.
If you were not provided with the necessary contract documents or if the mandatory information was not correct, the 14-day period does not apply. In the case of paid general consumer loans, your right of revocation is then basically unlimited; in the case of unpaid consumer loans, real estate consumer loans or consumer loan agreements that have already been fully performed and were concluded at a distance, other regulations apply. However, proper information by the lender is still possible at any time after the fact. If the information is only provided after the contract has been concluded, the revocation period is one month and begins with the handover of the missing contractual documents or mandatory information.
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