What forms of credit exist?
With the variety of different types of loans, it is difficult to keep track. The most common loans for private consumers
Installment loan / credit purchase
The installment loan is the most widely used type of loan and is available for amounts up to € 75,000. It is often used by consumers as a purchase credit for certain consumer goods. The total amount will be paid monthly in equal amounts.
Advantages lie in the excellent planability, since the rate level does not normally change. In addition, the award is usually made as a blank loan, so that the borrower does not need collateral. The transaction is also uncomplicated and not time consuming.
Disadvantages of the installment loan are that it is reported to the Private credit, the total price through the interest is more expensive than a direct purchase and the low rates can cause the borrower to overestimate his financial capacity.
line of credit
The credit line is also known as overdraft and describes the financial scope that many credit institutions allow in connection with their accounts. The account holder may withdraw money from his account until the overdraft limit has expired.
The biggest advantage is that account holders can use this loan very easily. The overdraft facility is often set during account opening and can then be used spontaneously by the account holder.
The biggest disadvantage is the high interest rates. With hardly any other loan, interest rates are as high as overdrawing the account. In addition, the interest rate can change at any time, so there is no financial planning certainty. Another disadvantage is that a credit line is granted in most cases only over a relatively small amount. If the framework is exhausted, the account holder may also be unable to cover his daily expenses.
The call-off loan is considered the better alternative to the credit line. It is set up for bank customers on a separate account and granted without terms and fixed interest.
The biggest advantage over the credit line is the lower interest costs. He grants the same advantages as an overdraft facility with flexibility and uncomplicated use. The repayment is made in small monthly installments, but the loan can also be redeemed at any time through special repayments. The biggest disadvantage of the call-off loan is that the bank can exercise its right of termination at any time and without stating reasons. However, an appropriate repayment period must be given to the account holder. The changing interest rate also contributes to the fact that planning certainty for a call-off loan is limited. In addition, not all banks offer such a loan.
Mortgage / annuity
The annuity loan is the classic for mortgage lending. The borrower settles the debt through constant monthly installments. The advantage of this loan is that, as a result, the loan debt continuously decreases and the borrower pays less interest over time, but contributes more to the repayment. An annuity loan is easy to calculate and offers are easy to compare. The different fixed interest rates also make it possible to adjust the financing individually. An annuity loan is very long-term and only makes sense if the finances are expected to remain constant.
A material loan, or even real credit is the counterpart to personal loan. While this is awarded based on the creditworthiness of a person, the material loan is assessed by collateral and awarded. It is cheaper than a personal loan, but the transfer of ownership transfers the asset to the creditor.
Small loans are all loans up to € 5,000. They are often available as instant loans and are paid back as installments. The transaction is uncomplicated and fast. As a precondition for the approval, a positive Private credit score and a fixed income are sufficient. However, there are many black sheep in the small loan market, so borrowers should pay special attention to honesty and fair interest rates.
A short-term loan, however, is a loan that is limited in time to a few weeks to months and rarely more than € 2,000 high. He is often given as an instant loan and should help, for example, if unforeseen repairs or new purchases bring a credit-worthy customer for a short period of time in a financial distress. It will be paid back in full within 30 days.
Balloon credits are used in the purchase of consumer goods such as cars. At the end of the term there is a very high closing rate, which is many times higher than the monthly installments and can account for about half of the total loan. Balloon financing is thus very similar to leasing, but the tangible asset is transferred directly to the borrower. The interest on the balloon loan is relatively high, as the default risk for this type of loan is very large.
The securities loan, also called securities lombard loan, is usually used to pre-finance securities transactions and is linked to their purchase. However, the general public understands by this term much more frequently the loan of the securities depository. In this form, it is a flexible call-off loan without Private credit, the amount of which can be up to 80% of the deposit value.
In the case of the policy loan, the life or pension insurance is awarded. The biggest advantage is the fast availability of money and comparatively low interest rates, which vary widely among providers. The biggest drawback is the high risk for the borrower: if repayment can not be made, this can have a very negative impact on retirement provision.
A personal loan is a loan that a private individual grants to another. Formerly this form of lending occurred almost exclusively in the personal environment of the borrower, meanwhile special Internet platforms allow anonymous brokerage. The advantage lies in the usually cheaper interest rates and the quick settlement. In addition, a Private credit information is irrelevant here. Disadvantage is the financial obligation that the borrower enters into with related parties. On Internet platforms, the borrower must also know to sell, in order to win the trust of private investors.
An online loan is offered and completed exclusively on the Internet. The variety is usually very straightforward and cheaper due to the lack of local advice. Instant loans are also often online loans. One of the biggest drawbacks is that the borrower can not negotiate meaningful loan amounts and repayment plans with his bank adviser, so an online loan requires a greater degree of ownership. In addition, interested parties should pay particular attention to the fine print and the actual interest rate in order to be protected against fraudsters.