Installment loans, also known as consumer loans, are in greater demand than ever. But what exactly is an installment loan? Basically, not every loan is an installment loan, because it has to meet certain requirements. A consumer loan, for example, is paid out to the borrower in one sum, while the repayment to the lender is made in precisely defined, constant monthly installments. The interest rate agreed between the two parties applies to the entire term of the loan and is therefore referred to as the fixed interest rate.
Compare conditions with the installment loan calculator
Installment loans are granted by direct banks and branch banks. The best way to compare the various loan terms is with the help of neutral and free online loan comparison portals. These allow an adjustment of the most important credit characteristics, such as the loan amount, the term of the loan and the purpose.
The advantage of such search masks for the consumer is that he can change the criteria mentioned almost arbitrarily. The result of the comparison is installment loans from various providers, which are listed in ascending order, starting with the lowest monthly installment. The term specified by the consumer serves as the basis for the calculation.
In addition, the installment loan comparison from Ratenkredit.de also provides loans tied to a specific purpose, which can be taken out by special lenders at special conditions. The following applies here: the more transparent a lender’s credit and contractual terms are, the more likely the borrower will benefit from a loan approval.
The interest rate: the heart of the installment loan
Consumers should take care that low interest rates are not always the same as a cheap installment loan. A basic distinction must be made between the effective and the nominal interest rate. Lenders often specify the nominal interest rate instead of the effective interest rate, which does not yet include additional fees or the discount. The level of the interest rate also depends on the creditworthiness of the customer, which is checked by the lenders by means of a Credit bureau query, and on the duration desired by the consumer.
Beware of the additional costs
In order to keep the costs of a repayment loan as low as possible, consumers should also identify potential additional costs before concluding the contract with the respective provider. Additional costs can occur, for example, in the form of a prepayment penalty.
As the name suggests, such compensation is due if the loan is to be redeemed before the end of the fixed interest period. The bank then loses profits due to the loss of interest payments, which the bank tries to compensate with the prepayment penalty. The residual debt insurance, or RSV for short, can also bear additional costs.
The residual debt insurance is taken out to protect itself against circumstances that could affect future installment payments. For example, possible unemployment or, in the worst case, death of the borrower. The specific amount of the residual debt insurance depends on the amount of the loan, the age of the person who signed it, and the term of the contract.