What is an installment loan?
In Germany, installment loans have been issued since the mid-fifties , which have their roots in the then large mail order companies.
The dealers wanted to allow customers to purchase goods by installment , if they can not pay the purchase price in full immediately.
For this they had cooperated with specialized installment banks , which have since been overrun by commercial banks and savings banks.
What is the definition of installment loan in German? What explanation do banks have when they favor certain professions when granting loans ?
What other conditions must be met for banks to grant installment loan? Which interest rate is usually granted? What about the interest rate development ? Can an installment loan be applied for online ? These and other questions we answer in this guide.
In a nutshell: information on “installment loan”
- An installment loan is used if the payment is made in one sum and the repayment is made in constant monthly installments . The last installment may vary in height.
- With a installment loan, there is no follow-up financing . The interest is tied for the entire term.
- To get a installment loan, customers must be at least 18 years old , since in Germany loans may only be granted to persons of legal age. Furthermore, the applicant must have a residence in Germany .
- For a loan application, details such as loan amount, term and intended use are important for the calculation. Then the monthly installments and interest are calculated.
- The faster the installment loan is repaid, the less interest you will have to pay. But this also means that you have to repay a larger amount each month.
The term “installment loan” suggests that this is repaid in installments. However, not every loan for which a repayment has been arranged in installments is an installment loan.
In general, there is talk of a installment loan, if the payment in a sum and the repayment in constant monthly installments takes place. The last installment may vary in height.
There is no follow-up financing for a installment loan. The interest is tied for the entire term .
As a rule, you can get a installment loan of between 1,000 and 100,000 euros .
An installment loan can run for between 12 and 84 months . In exceptional cases, you can arrange a term of up to 120 months .
What are the requirements for an installment loan?
In order to get a installment loan, customers must be at least 18 years , as in Germany loans may only be granted to persons of legal age. Furthermore, the applicant must have a residence in Germany .
Depending on the provider, the requirements may differ from those mentioned. As a rule, banks only grant loans to people who do not have a negative Schufa entry. A installment loan without Schufa query is rarely awarded in Germany.
It often happens that an installment loan is only given to people who have income from a permanent employment relationship . Thus, a installment loan for self-employed may be either out of reach or only with high interest rates.
Which conditions apply for an installment loan depends strongly on the professional group of the interested party. In addition, employees have more chances to get an installment loan than inactive people, freelancers or trainees .
As bank safety comes first, the profession of the applicant plays an important role as it is an indicator of whether someone is financially secure . Thus, from the perspective of the banks, the likelihood that certain professional groups will pay back the installment loan properly differs .
In addition to the employment status, the financial institutions assess the risk according to the personal financial circumstances and the loanworthiness of the customer. These criteria can provide better conditions if the borrowing rate is loan-dependent.
However, it can not be ruled out that banks will reject requests for installment loan, although sufficient collateral is available. This applies regardless of whether the debit interest is rating-dependent or fixed .
Purpose of the installment loan: What is it?
If you want to raise the installment loan for a specific purpose, it makes sense to state this clearly when making the application. The purpose may be, for example, a house construction, a car purchase or a debt restructuring .
There are many banks that only provide installment loans for renovations . Others offer an installment loan for auto financing at a lower effective interest rate than an installment loan without earmarking. As a rule, the applicant would have to deposit the second part of the registration certificate as collateral in such a case.
This is because the bank needs the car as security. If repayment fails for the installment loan, the bank can sell the car to settle the debt.
If the installment loan is needed for rescheduling, the applicant should notify the bank. In addition, the bank should know that no additional installment loan will be taken on the rescheduling . This not only has a positive effect on the loan rating, but also on the monthly rate.
Calculate installment loan and apply
If you are interested in an installment loan, you can first ask for offers from various banks to compare them. Details such as loan amount, term and intended use are important for the calculation. For the installment loan, the monthly installment and the interest are then calculated.
How high the monthly rate is depends on the specified duration. The faster the installment loan is repaid, the less interest you will have to pay. But this also means that you have to repay a larger amount each month .
Many banks also grant a installment loan with special repayment . As a rule, higher interest rates are charged for such a installment loan, but conditions are more flexible and more advantageous for customers.