Lenders and their terms

More and more lenders today offer several loan products for different purposes. In addition to many "traditional" banks, numerous online banks, loan intermediaries such as Maxda Kreditvermittlungs GmbH and financial service providers also offer loans. Because of the wide variety of offers from different lenders and the enormous increase in supply, borrowers should definitely perform an online comparison before concluding a contract. When searching for a loan, some factors need to be considered, for example loan amount, term, purpose, monthly repayment, interest (including interest rate) or the Schufa report. Especially due to the numerous online providers on the internet, searching for a loan has become significantly more difficult; borrowers who want to secure the best offer in the long term are strongly advised to compare loans via comparison portals. In advance, however, the most important factors in the loan search should be defined. The most important factors for the loan search are outlined below.

Interest rates

Fundamentally, consumers should always distinguish between nominal and effective interest rates. The distinction between nominal and effective interest rates is particularly important, as the two types of interest differ significantly. The nominal interest rate is a cleaned-up rate. The nominal rate alone only gives limited information about the expected loan costs. Of great importance, however, is the effective interest rate. The effective rate captures, in addition to the nominal rate, fees charged by the bank for taking out the loan. Individual factors also play an important role: the borrower can exert considerable influence through their own creditworthiness, the loan amount and term, as well as the monthly repayment. A low effective interest rate can especially be expected by borrowers who have a high income and a positive Schufa report. A positive Schufa report in particular can contribute significantly to a low effective rate; even borrowers with a low income can benefit from attractive rates with a positive Schufa. An alternative here are loans without Schufa, as for example brokered by Maxda. In these cases neither a Schufa check nor a Schufa entry is made.

Term and loan amount

Term and loan amount not only affect the monthly repayment of the loan. The term and loan amount also always define the repayment of the installment loan or the period in which the entire loan amount must be repaid. Borrowers who choose a short term should definitely consider the high liquidity burden that comes with selecting a short term. Especially for low-income earners there is a risk of loan default here, so they should rather opt for a short term carefully. Long terms, with a typical installment repayment, are associated with higher monthly loan costs. Long terms cause the outstanding balance to be reduced more slowly; because interest is calculated on the outstanding balance, the borrower must expect higher costs. Borrowers should always choose an adaptable loan product that allows term and loan amount to be determined individually.

The loan amount is paid out by bank transfer or in cash. Depending on the lending institution, this can take a few days to process. With an instant loan, however, you receive the money very quickly.

Repayment options when searching for a loan

Depending on the form of repayment, borrowers can choose between different repayment methods. In practice, for many installment loans, repayment in usually monthly installments has become established, as the name suggests. The installment repayment is characterised by the fact that the repayment of the entire loan amount is made in monthly instalments, which leads to a constant liquidity burden for the borrower. Because with installment repayment the outstanding balance is reduced within a short time, the borrower can benefit from decreasing loan costs during the term. Since interest is calculated on the outstanding balance, the borrower can expect declining interest expenses.

In addition to installment repayment, annuity repayment has become established above all in the area of mortgage loans. Like installment repayment, annuity repayment offers the borrower a constant financial burden. Unlike other forms of loan, the repayment, however, is exactly the same amount each period. The borrower must pay an annuity at precisely defined intervals, which is composed of the loan amount and the term. While the repayment portion increases during the term, the interest portion decreases. Annuity repayment is mainly used for long-term loans, such as mortgages, because repayment can be planned very well in advance and the risk of loan default can be significantly reduced. The residual debt repayment has become established as a repayment method in the area of car financing. The final instalment repayment is characterised by the fact that during the term only the interest on the loan is paid. At the end of the term the borrower must then pay the actual repayment. Because interest is calculated on the net loan amount for the entire term, the borrower must expect significantly higher loan costs with residual debt repayment.

Furthermore, there can also be special repayments (prepayments). These special repayments are not planned in advance and may incur extra fees depending on the lender. A special repayment means that the borrower has some money available and would like to use it for an unplanned repayment of the loan in addition to the planned monthly instalments.

The influence of Schufa on total loan costs and the lending decision

The Schutzgemeinschaft für allgemeine Kreditsicherung, short Schufa, was established as an institution to protect banks during the lending process. Schufa stores all relevant data about the borrower that are significant when granting a loan. For example, existing loan obligations, contracts, rental agreements, subscriptions and much more are recorded in Schufa. Based on Schufa, the bank can form an impression of the borrower's payment behaviour and their ability to pay or creditworthiness. Borrowers who can present a positive Schufa report can look forward to a low effective interest rate and thus lower loan costs, since their creditworthiness is relatively high. Borrowers who, on the other hand, have a negative Schufa report may have to expect a loan rejection in the worst case. After all, banks want the security that the loan will be repaid. Today borrowers can expect loans with and without Schufa. Loans without Schufa do not differ significantly from conventional loan products; the only difference is that Schufa is not considered in the credit assessment. For this reason, loan offers without Schufa are particularly recommended for borrowers with a negative Schufa report.

Loan comparison when searching for a loan

Borrowers who are interested in securing the cheapest loan offer for themselves in the long term should not avoid an online comparison. Numerous comparison portals now provide loan calculators for independent and objective comparison. Loan calculators allow the borrower to take individual comparison criteria into account in the comparison process, such as term, purpose, repayment, income, and more. This way the borrower can quickly filter out the best loan offers and save a lot of money in the long run. So before you start a loan application, always do a loan comparison to get an overview of the different terms offered by lenders and to find a way to save some money. You should also refrain from requesting a loan directly from your house bank without further research, as it may still have worse terms than other providers.