A loan often enables a way out of hopeless financial situations or the opportunity to afford something without enough equity, such as a new car. The interest rate for such a loan is determined by the respective banks themselves based on the key interest rate.
The key interest rate is set by the responsible central bank. It regulates the interest rate at which commercial banks can have the central bank issue money against collateral. In general, it can be assumed that the lower the key interest rate, the lower the interest on the loan, because it is also cheaper for commercial banks to obtain money. Before a decision is made in favor or again of a loan offer, all offers should be compared with each other.
Why should loan offers be compared?
Many banks promise loans with low interest rates. In the end, the borrower often pays too much. Nobody has money to give away today and loans with cheap interest rates often save a lot of costs. As a result, the total amount to be repaid is significantly lower than for loans with higher interest rates.
It is important here to compare loans with low interest rates, especially the effective annual interest rate, because this also includes the ancillary loan costs. The ancillary credit costs are formed, for example, by processing fees. A comparison that only includes the actual loan interest is therefore not meaningful. Likewise, the other factors such as amount, duration, etc. should be identical in a comparison.
The cheapest loan
At first glance, loans with low interest rates of around 3% are available. But the cheapest annual interest rates are not always the best loans. The ancillary loan costs are often very high or the term is very short, so that the repayment rates are correspondingly high.
The interest rates for installment payments in a period of 36 – 60 months are currently over 5%.
In addition, the cheapest loans can usually be found either at direct banks or on the Internet. Branch banks often charge higher interest rates. Under certain circumstances, it would be advisable to use a comparison portal to get an overview free of charge and without obligation.
What are the requirements for taking out a loan?
In general, certain requirements have to be met in order to be able to apply for loans with low interest rates and at the same time to have good prospects for approval. The borrower must be of legal age and have a permanent place of residence within Germany. Regular income from self-employed or dependent employment or from pension payments must also be proven. At the same time, there should be no negative Credit Bureau entries.
If these prerequisites are met, the bank still needs private data on marital status, the amount of the loan, etc. Some institutes require further information such as details of rental costs, collateral, etc. People who cannot provide a fixed income or who have a negative Credit Bureau entry have very little chance of getting a loan. Even if a provider should be found, it will most likely compensate for the increased risk with correspondingly high interest rates.