Corona strains the account balances. Small loans are a means of being able to meet payment obligations – what you should pay attention to.
After long months of the pandemic, many people’s financial situation is strained. Short-time working, missing orders or even unemployment lead to financial worries. A small loan can be an option to continue paying rent or leasing costs. We explain what needs to be considered here.
Choice of sponsor: A look on the Internet shows – offers for loans abound. Online financial institutions compete with regular banks. Iris Hoschützky, member of the board of FPSB Deutschland eV, a professional association of professional financial planners, advises you to contact your house bank before signing up. “We have a long-term business relationship here. The house bank can better assess your creditworthiness and your personal situation, ”she says. Due to the personal relationship, the interest rate and modalities are best to negotiate.
Credit costs: The range of interest rates offered is wide. An online survey for a loan of 5000 euros freely available yielded interest rates from 0.68 percent. Hoschützky advises that you pay attention to the fine print in such offers. “The banks charge closing fees,” she says. These are added to the interest. It points out the difference between the APR and the borrowing rate, which is just the interest rate on the loan itself.
Hoschützky currently considers costs of around four percent to be realistic. In the case of a loan of 10,000 euros over a term of five years, this results in a total amount to be paid to the bank of around 11,500 euros (including repayment). The banks set percentages to calculate the transaction fees. “With a 5,000 euro loan they may be higher than 10,000 or 15,000 euros.” This is because the processing effort of the banks is always the same, no matter how high the loan is.
Minusinsen: There are even banks that offer what are known as negative interest rates. These are loans where the interest rate is below 0 percent. Hoschützky advises to take a closer look here. “Sometimes the transaction fees are higher than other banks,” she says. Another reason for such cheap loans is that the data that is passed on to the bank when taking out such a loan is valuable. They are often resold for cash. Or a financial institution that offers particularly low interest rates requires the borrower to keep his current account with the bank in the future.
Short term loans: These types of loans are intended to help out in an acute emergency. They are still new in Germany and, according to the consumer portal Finanztip.de, there are currently only three providers on the market. The amount of short-term loans is usually very limited – up to 1500 euros. The repayment is made within one to two months. Finanztip.de writes to them: “Avoid short-term loans whenever possible.” The interest rate is about as high as with the overdraft facility. For a loan over 1000 euros, it is between eight and 15 percent.
Installment Loans: These loans usually have a term of five years and thus enable repayment in installments that can be managed. “Individual conditions can be negotiated with a house bank,” says Hoschützky. An option that is often requested and that the installment loan does not actually provide is early repayment. Since the banks prefer fixed terms, they can be compensated for changing the term. In the terms and conditions, this clause is recorded under the keyword early repayment penalty. Deviating from the standard term of five years, for example to two or three years, also costs money. But under certain circumstances it can be advantageous to accept a slightly higher interest rate if this means that the loan is paid off earlier, says Hoschützky. “Here you have to make an overall calculation and not just evaluate the interest rate as such.”
Collateral: If you borrow money, you have to secure it against the bank. Savings contracts, share packages or life insurance can be used for this. Hoschützky recommends that you consider carefully what security you will give to the bank. Finally, an emergency can arise that you cannot repay. Another aspect: “The better the collateral I offer, the lower the interest,” she says.
Schufa information: The so-called Schufa information is feared by many. This is information on the creditworthiness of the customer that banks obtain from the credit agency Schufa in Wiesbaden. If it turns out negative, the bank will refuse a loan. But there must be serious reasons for negative information: a blocked account, a loan that has not been repaid or outstanding dunning fees. If someone already has a loan and pays it back properly, he has a Schufa entry, but no negative information. A second loan can then be taken out if you have sufficient financial resources.
Hoschützky advises against borrowing money from a bank that does not use the Schufa information. “If you don’t do a credit check, you can pay for the increased risk elsewhere,” she says.
Dispokredit: the most important alternative to regular credit is the overdraft facility. In times of financial uncertainty, many banks agree to expand it at short notice, for example from 3,000 to 10,000 euros. “The interest on the overdraft facility is high, but I only have to pay it as long as I’m in the red,” says Hoschützky.
If the order situation changes or if money is released from my savings, I can settle the account immediately and have no financial burden from interest on loans. Finanztip also considers the overdraft facility to be a way of overcoming a bottleneck, but advises you to rely on the overdraft facility only for a short time. “Otherwise it is too expensive.”
Comparison portals such as Finanztip, Check 24 or Verivox provide a market overview of loans, which can be important for contract negotiations. It is best to use several portals in order to be well informed. The financial consultancy Max Herbst gives a credit rating for loan offers. At www.fmh.de there is a lot of information on financing and comparison options for loans, accounts or building society contracts.
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