The usual consumer instalment loan for free use is characterised by certain features that distinguish it from, for example, mortgage loans and corporate financing. It is usually concluded as an annuity loan with a fixed interest rate over a fixed term, the bank carries out a standard credit check and there is the option of residual debt insurance. In exceptional cases, the instalment loan can be taken out without a Schufa check and a new Schufa entry.
Instalment credit comparison: The effective annual interest rate as an indication of the costs
To get a cheap instalment loan, you can make a comparison. Pay attention not only to the interest rate, but also to the terms of the contract. You can calculate the actual cost of an instalment loan using the effective annual interest rate. Unlike the nominal interest rate, the effective interest rate takes into account all the costs associated with borrowing. Of course, a low APR means that you get a cheap instalment loan. At the same time, you can use the APR to calculate exactly how much you will pay back if you keep the repayment agreement unchanged as you made it when you signed the contract. The specification of the APR in the loan offer and in the loan agreement is required by law so that you can easily compare different offers and choose a favourable loan.
However, when planning your loan, also take into account the amount you can actually repay each month and leave some reserve. Depending on the loan amount and term, a different loan offer may be favourable. However, you should also bear in mind that the loan comparison often shows the most favourable interest rate of a provider, while the actual interest rate can differ significantly depending on your creditworthiness. You will certainly only know which credit provider is actually favourable for you when you read the actual offer prepared for you and not immediately online when comparing.
Consider the loan conditions
When comparing loans, also pay attention to the conditions. If you are going to repay the instalment loan without any changes as you initially agreed with the lender, the exact terms of the contract are not very important to you. In many cases, however, borrowers want to make a change in the repayment terms later. They either want to pay off a large part of the instalment loan early or need a break in payments. Almost every lender accepts a later change in the repayment agreement, but many of them charge a large fee for their concession.
What is really good value for you is a credit agreement that allows you to choose between a fee-free early repayment or a so-called instalment suspension. An instalment suspension on an instalment loan means nothing more than that you do not repay a monthly instalment, which extends the term of the loan. The possible costs for an instalment suspension are not included in the calculation of the APR, as you do not have to make use of it. Therefore, always read the terms and conditions of the contract when making a comparison so that you really find a cheap instalment loan.
Loan comparison and application
If you want to take out an instalment loan, you can go to your local bank - usually a branch bank - or find out about the possible conditions for a loan on the internet. A distinction must be made between basic loans with credit-dependent and credit-independent interest rates.
The instalment loan with creditworthiness-dependent interest cannot in principle be assessed from a comparison portal alone. The bank must first assess the applicant’s creditworthiness in order to make him or her an individual offer. Comparison portals therefore indicate an interest rate range for this type of loan; according to the PAngV (Price Indication Ordinance), they also indicate the interest rate that is granted to two thirds of all borrowers.
In the case of an instalment loan not dependent on creditworthiness, on the other hand, the interest rates are fixed for all applicants; these offers can be evaluated well from the comparison portal. If an instalment loan with suitable conditions is found, the application can be made directly online. A preliminary approval or rejection is usually given within minutes. The contract is concluded by post, and the applicant must identify himself by postal identification.
The intended use is not specified for the usual consumer instalment loan, but many banks grant more favourable conditions when it comes to vehicle financing.
Residual debt insurance
Residual debt insurance protects the bank or the borrower against default on repayment in the event of certain events. Usually, residual debt insurance is taken out against death, occupational disability and serious illness. In recent years, unemployment through no fault of the borrower has also been included. The extent to which residual debt insurance is worthwhile is often and extensively discussed. For the bank, this insurance is always useful, but for the borrower it often seems expensive. Its costs are explicitly not shown in the APR, even if the fees for the insurance are also repaid via the loan instalments.