The right financing for your needs

There are many types of financing and also many areas where this financial product is taken from. On this finance page we stay with the financings for the private household.

Wishes are many, but quite often the necessary financial means are not enough to fulfill them. This could be a new car, going on vacation, or even buying a home. For many of these goals it is not unusual if a credit is taken up for the realization.

And if you've been paying closer attention to developments in the credit market over the past few years, you know that interest rates on loans have dropped massively. So why not seize the opportunity and take advantage of a suitable loan offer. In the following, some selected types of loans with their special features will be presented. To this end, here is some information on how much a loan may be, in what way it must be repaid, and what should generally not be financed with loans.

What types of funding are available?

Roughly, two types of credit can be distinguished in private credit financing – the secured loan and the unsecured loan.

Financing through secured loans

Financing by the bank, secured loan - Finance

The best known secured loan is the mortgage loan. This is secured with a land charge on the property because of its high loan amount and long term. This gives the bank the right to sell the property if the creditor (i.e. z. B. Mustermann family) is no longer meeting its obligations.

Another form of secured loan can be the car loan. In this case, too, the bank has recourse if the loan is not repaid. Secured car loans are often arranged through the manufacturer's own banks.

Unsecured financing / credit

On the side of the unsecured loans is the installment loan or consumer credit. In this case, the debtor receives the loan without the bank having recourse to the acquired service. In contrast to a mortgage loan, the terms are significantly shorter, but the interest rate is somewhat higher. High-priced consumer goods such as televisions or household appliances are also frequently financed. This is also an installment loan, but the difference is that these types of loans are tied to the purchase of the consumer good.

Finally, there is the overdraft facility or overdraft credit to mention. This varies in the amount, because on a current account the debit balance is subject to daily changes. The overdraft facility is by far the most expensive type of financing.

What should you do with borrowed money

An installment loan gives the consumer great financial freedom. If the loan is applied for at the bank without a specific purpose, then the bank will not usually ask for the purpose of the loan. It is therefore completely up to you whether the loan is to be used to finance a car, furniture or a vacation trip. Only from certain credit amounts the bank becomes if necessary. Ask about the purpose of the loan and require evidence. However, this does not apply to all banks.

A loan can also help to pay off another loan – this is called credit rescheduling. A sensible use is bspw. the redemption of an overdraft facility. A redemption makes sense if the own current account regularly slips over the year into the minus. Thus, the expensive overdraft interest can be avoided. At the same time the danger is reduced that by the continuous overdraft the account so far into the minus slides that if necessary. important payments such as rent or utility bills burst.

What should be avoided at all costs?

When taking out a loan, you should ask yourself a few questions in advance. And in this context, the most important question is whether you can also afford the loan. Make yourself in advance a clear picture of whether you are able over the term of the monthly installments can serve. Because it is no use if your wish could be fulfilled, but at the same time after debiting the installment there is not enough money left for the entire living expenses. Serious providers can be found, for example, in the company directory Germany.

If one needs the credit however compellingly, bspw. because you need a vehicle to travel to work, but the loan installments are too high, you can also think about a longer term. This does not reduce the credit, but the monthly installment to be paid decreases and you have more financial leeway.

Furthermore, you should only use a loan for something substantial (definition stofflich o. materially) where it is also certain that you will receive value in return. In fact, there are always cases where people have taken out loans in order to z. B. to go on vacation or to acquire shares. If the price of the shares then falls, however, the purchased shares are worth significantly less, but your loan continues to exist in the known amount.

What can I do to bridge a financial bottleneck?

Financial bottleneck via credit financing

Many employees have a balanced income and expenditure situation over the course of the year. However, bottlenecks can occur during the year. Such bottlenecks can arise due to the financing of a vacation trip or also because unforeseen repairs or new purchases become necessary. To bridge these bottlenecks better, an installment loan can be a useful solution.

If the credit is concluded for such a purpose, you should pay attention to the term. If you already know that your income situation will change bspw. by a special payment at the end of the year again clearly more relaxed shows, then it makes sense to keep the term as short as possible. In this way, the loan does not burden one for too long.

If the shortage continues over the next year, a lower repayment amount can be agreed upon by controlling the term of the loan. In this connection the rule applies, the longer the term, the smaller the monthly rate with at the same time however rising interest.

What and when do you have to pay back your credit in the normal case?

Every loan must be repaid by the agreed date. The amount of the monthly installment depends on the term of the loan. With a long term, the monthly installment decreases and more money is left at the end of the month. In return, of course, the burden lasts much longer.

However, few people know that an installment loan can also be repaid early. This distinguishes it from a mortgage loan, where early repayment is possible only at high cost. Who concludes an installment loan, should therefore look carefully in the fine print. There you will find the repayment modalities for the loan.

The majority of banks allow full or partial early repayment. Often there is a surcharge on the repaid amount. Here you can calculate with a value of 1% on the repaid amount. This seems a lot, however, you must not forget that at the same time the loan interest rate is no longer incurred. With longer terms, this can add up to several hundred euros.

Financing conclusion

A classic installment loan is usually not earmarked for a specific purpose. The decision on the use of such credit is in the hands of the borrower. A loan can be used not only to finance a vehicle or a vacation trip. Taking out a loan also makes sense if, for example, the work is to be done. a current overdraft is to be avoided.

If you decide to take out a loan, always make sure that it can be repaid without any problems. Liquidity can be conserved by extending the term of the loan. And those who receive unscheduled money, the majority of credit institutions for the completed installment loan can make unscheduled repayments.

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