Loans and loans: You can also save money when borrowing money

Recognize warning signs

If the bank or savings bank refuses to give you the loan you want, consider this a warning sign. Banks and savings banks also want to do business and refuse a loan for a reason. However, be sure to question the reason for rejection and reconsider your economic situation!

Avoid credit brokers

Credit brokers charge a high commission. This is often not paid directly to the agent, but is “co-financed” through the loan. This has disadvantages: In addition to the costs incurred by the credit institution for the loan, you pay interest on the broker's commission. It is not uncommon for the interest rates on loans provided to be comparatively very high.

If you are lured by advertisements with “unbureaucratic, hassle-free instant loans – even if your bank causes problems,” you should be very careful. These credit brokers are increasingly not even arranging expensive loans, but rather “asset management” and similar contracts that are worthless to the loan seeker. The promised service – i.e. “debt settlement” or “debt management” instead of loan payout – is usually expensive and does not help the debtor. For legal reasons, companies are generally not allowed to provide proper debt advice.

Even if many intermediaries claim that concluding additional contracts (such as building savings contracts, silent partnerships, various insurance policies) would supposedly make it possible to get a loan or significantly improve your chances, you should definitely not get involved in this.

Particular caution is required if the alleged contract documents are sent to you as an expensive cash-on-delivery shipment. Most of the time, instead of the promised loan agreement, the long-awaited envelope only contains worthless papers or a request to submit further documents; the high fee is gone and later loan payout is highly questionable.

Be careful with debt restructuring

Do not trust loan offers that are only granted on the condition that all old liabilities are paid off. The pleasant prospect of only having to pay one installment can cost you dearly, even if the monthly burden may even be reduced by refinancing and combining your liabilities. This is usually only possible by extending the loan term.

The actual economic viability of a debt restructuring can only be assessed if one compares the total burden of the debt restructuring loan with the outstanding installment obligations for the existing loans plus the total burden for additional loan requirements.

Compare prices

Compare the prices of as many credit institutions as possible. You shouldn't let yourself be blinded by small monthly installments. The only thing that is meaningful is the effective annual interest rate, which credit institutions are legally obliged to provide. Almost all costs are spread over the entire term. Be sure to take into account and question special costs that are not taken into account in the effective annual interest rate (for example, voluntarily taken out residual debt insurance). You should only compare installment loans with fixed conditions.

The effective annual interest rate is usually lower for installment loans with variable conditions. However, variable conditions involve risk, especially if general interest rates rise. Many banks now advertise interest rates “from” …%, although the criteria for individual loan interest rates vary greatly. Sometimes the actual interest rate depends on the loan term, sometimes on the loan amount and often on the so-called creditworthiness of the borrower, which each bank also assesses according to its own criteria.

In order to find the best offer for you, you have to compare different conditions that are tailored to your individual needs. Make sure that the terms are the same, otherwise the effective annual interest rate is not very meaningful for a comparison. And don't let yourself be put under time pressure: assert your right to receive a draft contract so that you can read it at your leisure and only then make your decision.

Be careful with particularly flexible loan forms

The offers are often only tempting at first glance: you are granted a large credit limit, which you can usually use several times, similar to an overdraft facility. You can also choose the monthly installment amount yourself to a certain extent, which gives the impression of particularly great financial freedom. However, there are serious disadvantages to this: the amount of the minimum installment can increase if interest rates rise because, in contrast to an installment loan, you have agreed on a variable interest rate.

If the rate remains the same despite an interest rate increase, it will take significantly longer to repay your loan. Interest rates that initially seem particularly cheap quickly lose their appeal when you see from the small print that this promotional interest rate is only valid for one or two months and is then of course “adjusted” to market developments.

Since the interest charge is determined monthly or at the end of the quarter, it is easy to lose track. You neither know how long you will have to repay the loan nor how expensive the financing will be overall. If you repeatedly exhaust the limit, the loan process becomes more and more unclear. A framework loan is often the entry point into permanent indebtedness or even over-indebtedness, especially if you also use the normal overdraft on your current account.