Financial bottlenecks do not always have to be necessary to take out a loan. Because they are not only used to finance consumption or debt rescheduling, but also, for example, to finance real estate or to finance investments.
However, the basic principle is the same for all loans: a lender (creditor) leaves the borrower (debtor) with an agreed loan amount for a certain period of time. The remuneration for the transfer of the amount of money, the borrower pays the lender an agreed interest rate, which is expressed as a percentage of the loan amount.
In Germany, in addition to the nominal interest rate, credit providers also have to specify an effective interest rate, which includes the provision costs and therefore represents the more transparent comparison figure. The effective interest rate is naturally always above the nominal interest rate.
Consumer and installment credit
The consumer or installment loan is used to finance consumer spending and, depending on the provider, amounts to between 1,000 and 50,000 dollars .
The terms of consumer loans generally range from 12 to 120 months. It is often used to replace an overdraft checking account. The interest is usually lower than the usual interest rate for a credit facility and above the interest rate level for real estate loans.
Real estate loan
The real estate loan is used to finance the purchase of real estate or the construction of a property.
The financing usually runs over a period of between 5 and 35 years, with most financing amounting to amounts well over 100,000 dollars . Interest rates on such a loan are usually extremely low compared to other types of loan because the risk of default for the banks is very low. Securing by entering a land charge against the financed property is still characteristic.
This credit is granted in connection with the checking account. Most Germans are likely to have a credit facility. This is income-dependent and usually amounts to two to three times the monthly net income. In principle, the overdraft facility is only suitable for the temporary financing of financial bottlenecks, since the interest is significantly higher than with other types of credit. For many providers, they are clearly in the double-digit percentage range, although the interest rate is of course variable.
The investment loan is used to finance investments and is primarily available to companies. The amount of the loan varies widely and can range from a few thousand to several million dollars . The interest on this loan is also different. They depend in particular on the applicant’s creditworthiness. The receivable is usually secured by pledging the financed investment.
A comparison helps to save
Regardless of the type of loan, one should only resort to reputable and established providers or banks and, if possible, not to credit intermediaries. You should also consider that the effective interest rates are a good indicator for comparing individual providers, but that many lenders are now tying expensive supplementary insurance policies to the conclusion of a contract, which can make the loan considerably more expensive. In any case, residual debt insurance should only be taken out if there is really a need for such a policy. The comparison of different offers should not be left to chance either.