“Credit from person to person” wants to explain what is meant by a loan, what types of loans there are, what are the necessary conditions for a loan and with which tips loans are granted more quickly. The following text is to be understood as an information text about the most important data on the topic “credit”. He should help the applicant to apply for a loan.
Differentiation according to usage
Here you can divide the loan term into two main types. These are on the one hand loans for real estate. Here you use the word “loan” instead of “credit”. These loans can be used for a new building, a purchase or a modernization of an existing property.
The second subgroup are loans for consumer spending. The loans can be used for car purchases, holidays, furniture purchases or other purposes, there are no restrictions. The car loan was developed especially for car purchases. This loan may only be used to buy a car. As collateral is the security transfer of the car.
For this purpose, the car letter is deposited as security with the bank, it is considered proof of ownership. The car loan has shorter durations than other consumer loans, this is related to the useful life and the intrinsic value of the car.
Differentiation according to the repayment method
Here you can divide the loans into three repayment types. Depending on the installment amount, a distinction is made between annuity loan, repayment loan and total maturity loan.
The annuity loan is characterized by the fact that the repayment rate remains constant throughout the term of the loan. The repayment rate consists of an interest portion and a repayment portion. The regular repayment reduces the residual debt and thus the interest on the remaining debt. As the loan rate remains constant, the redemption portion increases in line with the reduction in the interest component. The annuity loan is the most common type of loan.
The repayment loan reduces the credit rate permanently. The repayment portion remains constant, the interest portion of the repayment rate decreases steadily. The advantage of the repayment loan is that the term of the loan is precisely determinable.
In the case of a total loan, the repayment is made in full at a certain time. Until then, only the interest accrued on the loan will be paid. Total credits occur especially for mortgages. These financings are long-term. The repayment often takes place through a life insurance or home savings contract. The combination of the loan with a life insurance has the advantage that the protection against death is included in this combination.
If the repayment is made by a home savings contract, a building savings contract is saved in addition to the loan. The total loan is then replaced by the allocated home savings contract. The advantage of this combination of credit and savings contract is that there is interest rate security throughout the term of the loan.
Distinction according to fixed interest rates
Especially for construction loans with very long maturities, the question arises after the interest fixed. If there is no fixed interest rate, then one speaks of a variable interest on loans, interest rate fluctuations can significantly change the repayment term. As interest rates increase, the repayment term increases, interest rate decreases accelerate the repayment of the loan. The problem is the interest rate increases, here can occur the situation that the repayment rate is no longer sufficient to pay off the loan.
If you want to avoid this interest rate uncertainty, the interest rate is suitable for a certain term. During this term, the credit interest remains constant. Only after expiry of this fixed interest period, the residual debt with the then current interest rate.
The fixed interest periods usually start at 5 years and then increase up to 20 years. Which fixed interest period is the best, can not be said. It always depends on the respective personal situation and the current interest rate development. In general, however, with low lending rates interest rates should be longer-term, and in periods of high interest rates interest rates should be shorter. Here, falling interest rates are expected, which can then be used at a later date for a new fixed interest rate.
Requirements for borrowing
Since every loan involves a risk for the banks, they attach great importance to collateral. The best security is the borrower himself. If its financial situation shows the lowest possible risk, there is no high risk of default. For example, civil servants have a very secure job and a secure income. For example, the case is different for temporary workers, here, the employment can be terminated at short notice
In addition to income, criteria for lending include the family situation, the financial position, existing collateral and mortgage lending. For land charges, the property serves as collateral. The bank can forcibly utilize these in the event of problems with the loan. The most common form of forced use is foreclosure.
Another safeguard for banks is the credit bureauauskunft. The credit bureau is a central register that stores all credit-related data. The banks are affiliated to the credit bureau and thus can look into the applicant’s financial credit situation before granting the loan.
Tips on applying for a loan
Obtaining a personal credit bureau
Before applying for a loan from a bank, an application should be submitted to the credit bureau. This is free of charge once a year. This makes it possible to see whether negative features, for example reminders, credit cancellations, etc., are stored. In cases of negative entries, loan applications are usually rejected. Even if the reported entries are done, these remain with the credit bureau still three years.
Self-information thus serves to check the stored data and to avoid further credit rejections.
fixed interest rate
The right choice for finding the fixed interest rate is very difficult. Here you should not rely solely on the advice of the bank. These often have very different interests than the loan applicants. It should make its own assessment of the future interest rate development.
Depending on the result, the corresponding fixed interest period should then be selected. If rising interest rates are to be expected, a long-term interest rate fixation should be sought, with falling interest rates a shorter fixed-interest period is recommended.
Determination of the repayment rate
The loan rate should be such that there is enough free income. Especially for young families, rising costs can occur in the future. Likewise, rising rental payments can lead to a more financial burden. Therefore, the rate should be set so that unforeseen expenses do not pose a risk.
Agreement on special repayments
Every credit agreement should include the possibility of special payments. Then the bank has no right to refuse such special payments. Special payments lead to faster repayments of loans and thus to falling total interest. It is better to set the rate lower and make special payments than overrate the rate.
Combination of a real estate loan with a home savings contract
This combination minimizes interest rate risk. The home savings contract should come after the expiry of the fixed interest period in the allotment. Allotment means that the building society grants a home savings loan. With this building society loan, the lending rate is fixed, regardless of the then applicable interest rate level. Especially with high lending rates, Bauspar interest rates are often much lower.
Soliciting multiple loan offers
In many cases, the mistake is made that only one bank, a loan application is made, usually at the house bank. In these cases no comparison of interest rates can take place. Often, foreign banks offer much cheaper lending rates. Banks are interested in new business. Especially new customers are interesting for banks, with further banking business is expected in this clientele.
House banks often have no interest whatsoever in offering the best lending rate to the claimant. You know that many existing customers do not question the amount of the lending rate.
If you want to take a cheap loan should think about it beforehand. This is the only way to avoid mistakes that can be very expensive depending on the loan term. Those who rely only on the statements of the bank, especially the house bank, often risk excessive interest costs. Even if inquiries seem annoying, they usually mean that banks offer loans at lower interest rates. Demands are evidence of interest and knowledge on the part of the applicants.