Installment loans can be used for short-term financing of purchases, for debt rescheduling and any other purpose. In this installment loan declaration, we summarize the most important properties of installment loans for you and take a look at current conditions on the credit market, typical requirements for borrowers and the legal framework for consumer loans.
Installment loan declaration: This is how installment loans work
Installment loans are granted by banks to consumers. Formally, the loans are annuity loans. The most important feature is annuity: a constant monthly rate that already includes interest and principal. The advantage for borrowers is that they are easy to plan, which is why installment loans are the most important form of financing for private households.
An installment loan can be earmarked. B. purchase a vehicle and deposit the vehicle letter as security with the bank. In most cases, the loans are not tied to a specific purpose. You can absorb sudden expenses, make purchases, or redeem existing debt. To apply for an installment loan, you have to meet certain requirements. Regular, attachable income and faultless Credit Bureau information are imperative. Many banks also require you to earn your living as an employee or receive a pension, while the self-employed and freelancers are often excluded from lending.
Facts about loans: market development, conditions and legal aspects
Installment loans with net loan amounts of approx. USD 1,000-75,000 with terms of 6-120 months (however, 12-84 months are typical) are common on the German market. According to Credit Bureau Credit Compass, there were 17.3 million current installment loans in Germany as of December 31, 2015. According to Credit Bureau, the average loan taken out in 2015 was USD 9,552.
The interest rates for installment loans are higher than the interest rates for mortgage loans because installment loans are only secured by formal assignment of wages and salaries and therefore represent a greater risk for the banks. A longer term and a weaker credit rating lead to higher interest rates. As a result of the Cream Bank’s monetary policy, general interest rates are currently lower than ever.
The legal regulations on installment loans are primarily found in § 491 ff BGB. Borrowers can terminate loans at any time without notice. In this case, banks may demand a maximum of 1.0% as prepayment penalty. Credit institutions, on the other hand, can only terminate if they are in arrears – an advantage over overdrafts. Banks must provide borrowers with the “European Standard Information for Consumer Loans” with an installment credit declaration with all conditions.
Conclusion on the installment credit declaration
Installment loans are annuity loans with a constant monthly rate, which can be used as consumer loans for any purpose, such as: B. consumer spending or debt restructuring can be used. The constant monthly rate makes it easy to plan the loan – which is why installment loans with currently around 17 million contracts are the most important financing instrument for consumers. A major advantage over overdrafts is that the bank cannot cancel at any time.
The interest rate for installment loans is currently lower than ever. Nevertheless, interest rates may differ significantly between different banks. The selected term and your credit rating also have an impact on the conditions. It is therefore essential to carry out a credit comparison before concluding a contract. B. on Ratenkredit.de