When it comes to financing, ie realizing the purchases, a clear picture emerges: what is necessary or can be planned is paid in cash, the unforeseen with a loan. The respondents save long-term for their own wishes, such as vacation. In contrast, expenses that are unforeseen are more likely to be paid for with a loan. After all, the broken car usually has to be replaced quickly so that you can get back to work. Appropriately, car loan is the most common use of an installment loan.
Five installment loan tips for you
In keeping with the motto “finance with reason”, we have put together the five most important installment loan tips for you. These tips should help you find the right installment loan and at the same time improve your chances of actually getting it.
Short or long term: Available- vs. installment loan
Depending on whether your purchase just overextends your budget or whether this will be the case in the long term, it is worth considering which form of credit is the right one: overdraft facility or installment loan. A disposition loan, ie an overdraft on your checking account, is often twice as expensive as an installment loan. If your account is overdrawn for a longer period, it makes more sense to apply for an installment loan. If you use your overdraft facility on a regular basis anyway, rescheduling on a cheaper installment loan offers a lot of savings potential.
Same basis: comparison of conditions for installment loans
If you have decided on an installment loan, it is always worth comparing the conditions of different institutes before applying. Some providers lure with an “asterisk offer”. This only applies to a restricted group of people with very good creditworthiness, for a certain loan amount and term. It is probably a few percentage points from your current interest rate.
In general, the interest quantifies the price of the loan. Always compare the APR. It includes all costs for the loan and is therefore the ideal basis for a quick comparison. Also pay attention to an identical term and loan amount when comparing different providers: This is the only way the comparison is meaningful.
Creditworthiness matters: the credit Score
Most loans are credit-dependent. That means: Based on your personal data, the credit institution determines the probability with which you will repay the requested loan. As a rule, the bank receives the information for this via credit (abbreviation for “Protection Association for General Credit Protection”). This credit agency collects the credit-relevant data of the people in order to make them available to banks and commercial companies.
The higher your likelihood of repaying the loan and the lower the default risk for the bank, the higher your credit score and the better your credit rating. And the higher your credit rating is, the lower the interest rate that is offered to you. It makes sense to regularly check your own data at credit and correct it if necessary. You can arrange both on the credit website. Such information is free of charge for you once a year.
Pay attention to the wording: correct credit inquiries
Every credit request is forwarded to credit. Too many inquiries have a negative impact on your score and thus on your credit rating. The reason: credit then assumes that you make so many credit inquiries because you are always rejected.
It is therefore important to explicitly advise the clerk to make a so-called “request loan terms”. Because this type of query is deleted after ten days and therefore does not affect your credit value. The installment loan specialists always ensures this when making inquiries and in this way reduces the risk of a bad credit score.
Everything at a glance: Plan your financing request realistically
Whether you are buying a new car, financing a modern kitchen or planning a debt rescheduling – your loan amount and the monthly installment should be tailored to your life situation. Clean up and compare all your income and expenses. This is the only way to get a realistic picture. For example, when rescheduling a debt, it is important not only to replace the old loans, but also to take account of credit card debts and overdrafts. It is also important that you can pay the monthly installment over the entire term.
It is best to set the monthly rate a little lower and make special repayments if possible. In this way, you remain flexible and do not immediately get into a financial bottleneck in the event of unexpected special expenses.
In summary, good interest rate conditions are crucial for installment loans, but not everything. Because the loan must first and foremost fit you and your individual financial situation. It is important that you do not overexert yourself, but plan realistically and remain flexible.