Assess your financial situation realistically
honestly check how much you can regularly divert from your monthly income to installments over the entire term of the loan without having to restrict yourself excessively! You should always take into account foreseeable reductions in your income and increases in costs. It is also advisable to take into account the creation of reserves. If, despite good intentions, you have not yet succeeded in setting aside a similarly high savings rate each month – and not spending it again shortly afterwards – you should reconsider your monthly installment-bearing capacity.
think carefully about whether what you want to purchase with the help of a loan is something you actually need right away! Logical: those who save until they have the purchase price together avoid the loan costs.
market watchdog investigation into consumer loans
Financing a new car from the dealer, paying off the TV in installments or a short trip to the overdraft facility of the checking account at the end of the month – consumer loans are diverse and frequently used. According to a representative online survey by the financial market watchdog, around two-thirds of consumers have taken out at least one form of consumer loan in the past five years. The usually cost-intensive overdraft facility of the checking account with 29 percent and the credit line of the credit card with 26 percent are the most used credit types in germany. One in four credit users already has experience with debt rescheduling and chain loans.
Recognize warning signs
If your bank or savings and loan company refuses to give you the loan you want, consider this a warning sign. Banks and savings banks also want to do business and will not refuse a loan without good reason. However, it is important to question the reason for rejection and to reconsider your financial situation!
Avoid credit brokers
Loan brokers charge a high commission. This is often not paid directly to the agent, but "co-financed" through the loan. this has disadvantages: in addition to the costs incurred by the credit institution for the loan, they pay interest for the intermediary commission. It is not uncommon for the interest rates on brokered loans to be comparatively high as well.
Attract in advertisements with "unbureaucratic, problem-free immediate loans, – even if the house bank makes problems", extra caution is advised. these credit brokers are increasingly not even brokering expensive loans, but instead, for example, "asset management" loans and similar contracts that are worthless to the loan seeker. because the promised service – i.e. "debt settlement" or "debt management instead of paying off the loan – it is usually expensive and does not help the borrower. For legal reasons, companies are generally not allowed to provide proper debtor counseling.
Even if many brokers claim that the conclusion of additional contracts (such as home savings contracts, dormant partner’s interests, various insurances) would allegedly make the granting of the loan possible in the first place or significantly improve your chances, you should not get involved in any case.
You should be particularly cautious if the alleged contract documents are also sent to you as an expensive cash-on-delivery item. Most of the time, instead of the promised loan agreement, the eagerly awaited envelope contains only worthless papers or a request to submit further documents; the high fee is gone and a later loan disbursement is highly questionable.
Beware of debt rescheduling
Distrust loan offers that are only made on the condition that you pay off all your old debts. The pleasant-sounding prospect of paying only one installment can cost you dearly, even though the monthly burden may even be reduced by rescheduling and consolidating your liabilities. In most cases, this is only possible by extending the term of the loan.
The actual economic viability of a debt restructuring can only be assessed by comparing the total burden of the rescheduled loan with the outstanding installment obligations for the existing loans plus the total burden for an additional loan need.
Compare the prices
compare the prices of as many credit institutions as possible. They must not be blinded by small monthly installments. Only the effective annual interest rate, which the banks are required by law to quote, is meaningful. Almost all costs are allocated to the entire term of the loan. It is essential that you also take into account and question special costs that are not included in the effective annual interest rate (e.g., voluntary residual debt insurance). You should only compare installment loans with fixed conditions.
The effective annual interest rate is usually lower for installment loans with variable conditions. However, variable terms entail a risk, especially if the general interest rate level rises. Many banks now advertise interest rates "from" the market . %, whereby the criteria for the individual loan interest rate are very different. Sometimes the actual interest rate depends on the loan term, sometimes on the loan amount, and often on the borrower’s creditworthiness, which each bank also assesses according to its own criteria.
In order to find the most favorable offer for you, you must therefore compare different conditions that are individually tailored to you. make sure that the terms are the same, otherwise the effective annual interest rate is not very meaningful for a comparison. And don’t let yourself be put under time pressure: assert your right to receive a draft contract so that you can read it at your leisure and only then make your decision.
Beware of particularly flexible forms of loans
The offers are often only tempting at first glance: you are granted a high credit limit, which you can usually use several times, similar to an overdraft facility. You can also choose the monthly installment amount yourself to a certain extent, which gives the impression of particularly great financial freedom. However, there are serious disadvantages to this: the minimum rate can climb as interest rates rise, since you have agreed on a variable interest rate, unlike an installment loan.
If the rate remains the same despite the interest rate increase, it will take significantly longer to repay your loan. At the beginning, particularly favorable interest rates quickly lose their appeal when you realize from the small print that this promotional interest rate is only valid for one or two months and then, of course, "adjusted" to the market development becomes.
Since the interest charge is calculated monthly or at the end of the quarter, it is easy to lose track of the situation. You do not know how long you will have to repay the loan, nor how expensive the financing will be overall. If you repeatedly exhaust the framework, the course of the loan becomes increasingly opaque. A framework loan is often the first step toward permanent indebtedness or even overindebtedness, especially if you also use the normal overdraft facility on your checking account.
Caution with loan combinations with endowment life insurance policies
Loan offers in which the loan is to be repaid at the end of the term (usually after twelve years) via an endowment life insurance policy taken out at the same time are usually much more expensive than a comparable installment loan with a pure term life insurance policy. The disadvantages are obvious:
- The agreed variable interest rate allows the installment amount to climb as the interest rate level rises.
- In addition to the monthly interest payment for the loan, you also pay the insurance premium.
- Interest is calculated on the original loan amount over the entire term, since no repayment is made in the meantime.
- The loan is not repaid until the end of the term – usually after twelve years – via the expiry payment of the insurance policy. The bank therefore receives a large part of the saved insurance sum for the repayment of the loan. If the maturity payment is not sufficient to repay the loan in full when it falls due, a follow-up financing may be necessary in the event of poor performance of the profit participation. You cannot therefore be sure that you will actually be able to repay the loan in full at the end with the insurance sum you have saved.
- The loan relationship usually lasts for twelve years. Over such a long period of time, it is difficult to plan your own financial resilience.
your experiences are important!
For market observation from the consumer’s point of view, you can your experience be very valuable: describe your difficulties with companies, suppliers or products.
Think carefully about whether you really need residual debt insurance
The term "residual debt insurance" refers to a term life insurance policy, the sum insured of which is usually adjusted to the planned course of the loan and which is intended to cover the outstanding residual debt in the event of the death of the insured borrower. Often, additional insurances are also taken out – for example, for disability, accidents and unemployment.
The advantages of these fine-sounding insurance policies are smaller than you think. A critical look at the small print often quickly reveals that the insurance benefit is rather questionable just when you need it.
In addition, the insurance policies offered by the lender are seldom particularly favorable. In addition, the insurance premium is usually calculated as a one-time premium for the entire term of the loan when the contract is concluded and, like the agent’s fee, is usually co-financed via the loan. Here, too, you have to pay additional interest.
If the bank insists on taking out residual debt insurance, it is legally obliged to take the insurance costs into account in the effective annual interest rate. Only if the contract is concluded at your request may the bank disregard the insurance costs when calculating the effective annual interest rate. If you can prove with the help of an uninvolved witness (who is not a co-borrower) that you would not have received a loan if you had not taken out insurance and the bank still did not take the costs into account in the effective interest rate, you have a good chance of enforcing an interest rate reduction as a legal sanction for misrepresentation.
It is often more favorable than taking out a new residual debt insurance policy and financing the premium via the secured loan if you can offer an existing term life insurance policy as collateral or at least obtain a favorable contract by comparing prices with various providers.
Never sign in blank
Sign a loan application only if it is completed in full and you can see your entire repayment obligation. Do not leave anything to chance and make sure that all information about your financial situation and other loan obligations (the so-called financial self-disclosure) is complete and absolutely correct. Embellishments or forgetfulness – even if they are suggested by the bank employee or a credit broker – can take revenge at the latest when payment problems arise, if the bank accuses you of fraudulent intent. You are responsible for these details with your signature. Therefore, always have a copy of the loan application, the repayment schedule and your self-disclosure handed over to you immediately.
Revocation of the loan agreement
If, in retrospect, you have second thoughts about whether you made the right decision in taking out the loan, you can revoke the loan agreement within 14 days in accordance with the German Civil Code. The period does not begin until the contract has been concluded, you have received all the necessary contractual documents (§ 356 b BGB) and these contain the statutory mandatory information (including information on revocation). The revocation is made by a declaration to the lender. It does not have to be justified and can, for example, be made in writing or in text form (d.H. By fax or e-mail). To meet the deadline, it is sufficient to send the revocation in good time, which you must prove in the event of a dispute. A registered letter or a letter with acknowledgement of receipt has a higher probative value than the confirmation of dispatch in the case of an email.
If several consumers as borrowers conclude a consumer loan agreement with a borrower as lender, each of them can independently revoke his declaration of intent to conclude the loan agreement. If you revoke the contract after the loan has already been disbursed, you must repay the loan amount within 30 days of sending the notice of revocation. Even if you do not pay on time, the revocation remains effective. In this case, you will automatically be in default after the 30 days. This means that from this point in time, the lender can claim default damages on the entire amount owed instead of the contractual interest. In addition you may have to. still collection costs / costs of legal action. Failure to repay (on time) can therefore be expensive and – due to the possibility of negative schufa entries – also lead to a significant deterioration in creditworthiness.
If you repay the loan in full within 30 days of revocation, the lender may charge interest at the contractual rate for the period between revocation and repayment. This amount is therefore "on top of it.
If you were not provided with the necessary contractual documents or if the mandatory information was not correct, the 14-day period does not apply. In the case of paid general consumer loans, your right of revocation is then basically unlimited; in the case of unpaid consumer loans, real estate consumer loans, or consumer loan agreements that have already been completely fulfilled and were concluded by means of distance selling, other regulations apply. However, proper information by the lender is still possible at any time afterwards. If this is not done until after the contract has been concluded, the revocation period is one month and begins with the handover of the missing contract documents or the receipt of the missing documents. Mandatory information.