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Anyone planning a major purchase, renovation or even financing their own home should find out about loan options in advance. If the loan is chosen wisely, the financial project will stand on a firmer footing and prevent large sums of money from being lost.
In addition to low interest rates, rules for repayment, deferral and rescheduling are also relevant. If you follow a few tips, choosing the right loan will be easier.
There are basically different ways to take out a loan:
On site at the bank
If personal advice and a specific contact person are important to you, you should take out your loan through a bank branch. The credit line costs are then probably slightly higher than with other types of conclusion. But good service is often worth it.
Online
Often the costs are lower than in a physical branch, but sometimes the customer service and the accessibility of the bank suffer as well. This is particularly annoying when important questions need to be clarified at short notice. However, you can often compare a loan with others in terms of its conditions more quickly and conclude the desired loan more quickly.
In trade through financing purchase
For higher-priced purchases, many dealers offer the purchase via installment financing. These are available with different interest rates and terms. It should be noted here that zero-interest offers are often no cheaper than those with interest. Some retailers add the no longer payable interest payments to the product prices in advance and an apparent bargain is no longer a good catch. With the classic loan, whether for free use or earmarked, whether concluded online or on site, important questions arise that need to be clarified in advance.
Cheap credit only with a high credit rating
Before specific offers are obtained, you should check your own creditworthiness in order to know about the creditworthiness. If this shows a negative score, it is worth checking the stored data and deleting outdated or even incorrect information. If incorrect data remain stored in the score, this can lead to a reduced creditworthiness, which banks require in order to issue loans at all. In general, the better the credit rating, the easier it is to take out loans with low interest rates.
Plan ahead
Anyone who knows exactly about the planned expenses that a loan should cover in the short and medium term can better adapt the credit line to the amount actually required. A larger loan is always preferable to two or three smaller ones, as each individual’s creditworthiness may deteriorate and the conditions are usually worse.
Type of loan, repayment rate and term
Anyone who wants to buy a car or is planning large-scale renovation work is usually better off with a special-purpose loan, as they offer lower interest rates due to their commitment. Debt rescheduling loans are also earmarked and there are always attractive offers. The term should be calculated – here it is important to also include the next few years and to ensure that the loan can always be serviced. It has proven useful to set a monthly repayment rate of a maximum of 40 percent of the remaining money after deducting all expenses, so that you do not get into financial distress when repaying.
Merging with another person
Anyone who alone has a negative credit rating or where it is advisable to take out a loan together, as in joint projects, the registration of two borrowers ensures a higher creditworthiness, because the probability of default potentially decreases. This also ensures better offers with lower interest rates and better general conditions. A prerequisite for this approach is a solid basis of trust and the awareness that both are then debtors and must take responsibility for the other’s possible failures.
Ask condition inquiries instead of credit inquiries
Anyone who makes credit inquiries directly to the institutes will burden their own credit report because extensive inquiries are made to the credit agencies for the offers. When comparing yourself, you should make sure that all information is the same and that the specific offers contain the same conditions as promised in advance.
Keep an eye on costs
In addition to the different interest rate options, it is important to pay attention to hidden or not directly relevant costs. These include, for example, the costs for replacement and special repayment. A credit institution may demand an amount that serves as compensation if the loan is terminated early. The loan agreement should be checked carefully because these costs can later let the savings evaporate in the event of a debt rescheduling. How exactly does a rescheduling work and what needs to be considered summarizes this article.
Constantly sifting through conditions and good offers
If there are better conditions, such as low international interest rates, debt rescheduling should be considered. In this way, a loan can be moved on better terms or several smaller ones can be merged into a larger, but ultimately cheaper one. Furthermore, your own financial situation can improve over time: if you earn more, but have the same expenses, you have more money and a better credit rating. So you can inform yourself from time to time and at the right time reschedule to a loan that offers better interest rates. If these points are observed and carefully checked, a suitable loan is no longer in the way and the financial project can be tackled without onerous loan conditions.
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