There are many different synonyms for installment credit. It is also referred to as consumer or consumer credit. Basically, the installment loan is a loan granted by banks to individuals as well as self-employed or freelancers and companies. It is characterized by the fact that the repayment is made in monthly equal installments over a pre-defined term. The installments are due at a fixed date. The interest rate on installment loans is fixed throughout the term of the loan. Maturities are usual and possible between twelve and 120 months. Not every bank offers the entire spread of maturity.
The different terms for installment loans
Loans with consistent monthly installments are standardized products among banks that also sell their loans online. The processing is carried out according to a predetermined standardized automatic procedure. Consumers also see the installment loan as
- Online credit
- instant credit
- car loan
known. They are characterized by the fact that the assignment to the borrowers takes place as a blank loan. Borrowers do not have to provide any special collateral if they apply for an installment loan. As a rule, banks issue the installment loans on the basis of the impeccable Schufa information and the regular income of the borrowers, which must also be proven. When submitting a loan agreement, the signed documents must also show income in the form of a current salary statement. In addition, some providers ask for bank statements for three months in a row to check the borrowers’ details of their other payment obligations.
If creditworthiness is insufficient, an installment loan can also be secured by a guarantor. If the installment loan is issued by a car bank in the form of a car loan, the automobile banks require the vehicle letter to be deposited as additional security during the repayment term.
The repayment of installment loans
In principle, installment loans are to be repaid over the entire term in constant monthly installments. In addition to the loan amount to be repaid, there are additional costs for interest and fees, which are reflected in the installment loan in the APR. The annual percentage rate makes different loan offers comparable. About a credit comparison can be found so the best deals.
The residual debt insurance
Many banks expect borrowers to take out residual debt insurance for themselves and the bank for added security. The residual debt insurance makes an additional loan expensive because the costs are not reflected in the annual percentage rate of charge. The residual debt insurance guarantees that the insurer takes over the rates of the borrower for a certain time in case of a long illness or involuntary unemployment. In the event of death, the loan is completely repaid so that the survivors no longer have to make any payments.
The interest rate on installment loans is in the midfield. Much cheaper are real estate loans and mortgage loans. Significantly more expensive are general loans such as disposition loans, call-off loans or securities loans.
Advantages of installment credit
Every form of credit that is available on the German market has its right to exist with the corresponding advantages and disadvantages. With an installment loan, the borrower bonds to a fixed monthly installment over a fixed period of time. This makes the commitment manageable and the costs are fixed. Framework credits, in which the lender sets up a credit line for their customers that they can or do not use, work significantly differently. Interest must always be paid only when the loan is used. The collection and call-off loans make financial flexibility. Also, the credit lines that credit card issuers provide to their customers in connection with the use of the credit card have their advantages. Especially when it comes to revolving loans, where the customer often has to pay only a percentage amount of the balance. However, these loans are much more expensive compared to installment loans.