What to look out for when taking out a loan?

Certainly there are many good reasons to take out a loan. Financial flexibility and free wish fulfillment are often in the foreground here. Before the decision to take out a binding loan is made, however, the borrower should be aware of a number of quite important things. For each prospective customer the fact is obvious that different credit types exist. This raises the question of the monthly costs, the terms and conditions and, of course, the respective requirements.

Forms of credit: Overdraft facility and installment loan

Here it is necessary to differentiate. An overdraft facility, for example, is a so-called overdraft (short: overdraft facility), which is granted by many banks. However, this applies only to holders of current accounts. Relatively high interest rates are the order of the day. Say, the longer this form of credit is used, the more expensive it becomes. For money needs of only a short duration, the overdraft facility is well suited and therefore recommended. Unfortunately, not everyone is approved for such an overdraft or it may have already been exhausted.

The installment loan is somewhat different. As a loan from a bank, it usually comes with a fixed interest rate. Fluctuations in interest rates are therefore excluded, the rates are constant. Generally, it involves providing amounts of money between about 1.500 and 50.000 euros. Duration of the term is usually 12 to 72 months. The interest rates of the various banks differ sometimes significantly. That is why, if possible, several offers should be obtained before taking out the installment loan.

A stack of folders with different types of loans

Tip: If you inform your bank that you can repay the remaining repayment amount at any time, you can save a lot on interest!

Short-term loans and framework loans

A relatively new form of credit in Germany is the small loan. It has a low maturity of only 15- 60 days and a maximum volume of 3.000 €. The VEXCASH AG is one of the representatives in this area. There one distinguishes oneself above all by own Scoring system, which was developed particularly for short terms and falls back evenly not only on the Schufa Scoring. The customers must be aware, however, that they have to pay back the loan amount within this short period of time, which requires a high level of personal responsibility.

A special variant is also the framework credit. This credit is available on call, so to speak. Here, the individual agreement with the bank, as well as the amount withdrawn itself, determine the repayment and interest rate. Borrowers should note, however, that the interest rates on these loans could well be raised if market rates rise.

Borrowing: Requirements and conditions

To ensure that the envisaged project does not ail prematurely, the following points should be taken into account:

Age of majority: 18+

Before applying for a loan, the borrower should check the 18. Have reached the age of majority (legal capacity).

Domicile in Germany

The rule is: anyone applying for a loan in Germany must be able to show that he or she is a resident of the Federal Republic of Germany. The same applies to the bank account!

Permanently employed, even indefinitely – working in the company for at least 6 months

The bank needs certain assurances and securities. A long-standing working relationship is the best prerequisite for a timely and sustainable credit approval. Especially with consumer loans ( consumer finance ) are income tax proofs, salary proofs usual. If you are a freelancer and therefore do not have a fixed income, you will be asked to prove your income for two to three years by means of business evaluations.

Schufa entries

Those who have already attracted attention with their negative payment behavior and have thus caught a Schufa entry must reckon with rejection on the part of the lender. Depending on how high the score value ( Schufa survey ) is, the lower the chance of approval of a loan application.

Last but not least: the borrower assumes full responsibility!

From the concluded credit agreement it is clear that the borrower (the signatory) must pay for all costs arising from the approved credit correctly in terms of time. He commits to this with his signature, which activates the credit!

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