The right loan for the right use case
The internet makes it easy today to compare interest on a loan and sign the loan agreement. With an online calculator, the most important conditions can be found out quickly. But it is often not quite that simple, because anyone who takes a closer look at borrowing quickly stumbles across the various types of credit. Not every loan is suitable for every application. So how do you find the right loan for individual needs?
The classic installment loan can be used in many ways
An installment loan – often referred to as a consumer or consumer loan – is a loan that can be used for very different applications. It can be used to compensate for an overdraft facility loan. But you can also finance an acquisition with it. The use of an installment loan is not earmarked. The borrower does not have to tell the bank what they need the borrowed money for. For all loans, it is advisable to compare the interest rates and the conditions before concluding the contract. As the banks are in tough competition with each other for solvent customers, interest rates differ. You should use this savings potential.
The installment loan for the rescheduling of the overdraft facility
The overdraft facility is a perpetual credit that the bank can set up for a checking account. A prerequisite for this is a solid creditworthiness of the account holder. This includes regular income and perfect information from the Credit Protection Association (KSV). If these requirements are met, a bank can set up a planning framework of around two to three months’ income. Deviations are possible both upwards and downwards. They depend on how the bank evaluates the creditworthiness of the account holder. He can make unlimited use of the credit line set to bridge short-term financial bottlenecks.
However, the overdraft facility is an expensive loan. The interest is considerably higher than for an installment loan. If you regularly use your disposition framework in full over a longer period of time, you should consider whether rescheduling with an installment loan is an option. If the debt is rescheduled, the account holder takes out a consumer loan to offset the overdrawn account. This gives him more financial freedom and saves the expensive interest on an overdraft facility. The installment loan is in comparison considerably cheaper than the overdraft facility. Such debt rescheduling is common and is recommended by the banks if the overdraft facility is permanently exhausted.
The installment loan to finance an acquisition
A consumer loan can also be taken out if you want to buy an item and do not have the necessary financial means or if you do not want to use existing reserves. A typical use is to buy a new washing machine, computer, home furnishings, or even finance a trip or surgery. Consumer advocates recommend that you only take out a loan if you receive something that can be used in the medium term. The installment loan is basically possible for the financing of a trip, but less recommendable. As a rule, no security is required for an installment loan. If the borrower can prove the required creditworthiness, he does not have to provide additional security such as a guarantor or a second borrower for the loan to be approved.
Car and construction loans are earmarked
A special form of consumer credit is car and construction loans. These two loans are also an installment loan with a fixed monthly loan rate and an agreed term. Free special repayments or early repayment without additional costs are usually also easy to arrange as with a classic consumer loan. However, just like a home loan, a car loan is earmarked financing. This means that the borrower can only use the car loan to buy a car.
The building loan is only granted for modernization and renovation measures of a property. Of course, the borrower can also take out a classic installment loan to buy a car or modernize his home. But it is worth comparing the conditions for a car or a construction loan. Since a material equivalent in the form of a motor vehicle or a higher-value property is provided as security for these special-purpose loans, the interest on these loans is often somewhat cheaper. With such financing in particular, it is worth comparing the conditions in order to identify the cheapest offer and to save money.
The instant loan for urgent cases
An instant loan is a consumer loan with immediate approval. So it happens again and again that people who need quick liquidity take out such a loan. The instant loan is to be distinguished from the online loan. A classic installment loan can usually be applied for directly from a bank. However, many banks also offer the option to apply online. If you use a comparison calculator to check the conditions, you can usually apply immediately.
For this purpose, the borrower sends his personal data and the details of the desired loan online to the bank. A credit check is carried out there. The creditworthiness of the borrower is also checked. It usually takes between five and ten bank working days for the financing to be approved. If the borrower is in dire need of money, an instant loan is often the better alternative. For an instant loan, the borrower enters his personal data and the details of the desired loan online and transmits it to the bank. This checks immediately online based on the entered data whether it grants a loan. An instant loan is often a small loan amount, the approval of which does not require a major credit check. The borrower therefore knows within a few minutes whether his request will be approved and whether he will receive a loan or not. This can be very useful in urgent cases.
The loan for long-term financing
An installment loan and its special forms are loans with a short to medium term of around eight years. If you want to buy a property, you usually need a higher loan amount, the repayment often takes two or three decades. An installment loan is not suitable for this. In such cases, a real estate loan is the right choice. The loan is secured by a mortgage so that the bank receives security in the event that the borrower is unable to meet its payment obligation. A careful comparison of interest rates is also worthwhile when it comes to real estate financing, before concluding the contract.