Are you planning to take out a loan? For example to finance a car? You are not alone in Germany with this. Rather, over 8 million loans were taken out in Germany in 2017 alone. These are required for different purposes. The most common are:
- debt rescheduling or the repayment of an expensive overdraft facility
- the purchase of a car
- the purchase of furniture such as a kitchen
- necessary renovation or modernization work on your own house or apartment
- the purchase of technical equipment
However, every loan also incurs costs. Starting from the necessary repayment, of course, since a loan has to be returned to the lender gradually, right up to the interest that is due for the lending. We have summarized here how you can keep your loan costs as low as possible.
Check whether the loan you want to take out really makes sense
Do you want to buy a new car or do you need a new vehicle because your old car, unfortunately, refuses to work? Then in many cases, of course, a loan is needed, because only a few consumers can afford to buy a suitable vehicle without borrowing. Necessary modernizations, renovations or conversions are usually associated with borrowing.
If a loan is really worth it, you should ask yourself, above all, when it comes to “indulging yourself”. The new notebook on installment payment, the new cell phone or the dream vacation on the pump – these are purchases that can significantly reduce your financial performance by borrowing for years. The question is always how high the benefit is compared to the effort or the cost.
Therefore, check carefully whether the reason for which you want to take out the personal loan actually justifies tying up your financial resources to you for years to come.
Good Credit Tip: Think about whether the benefits you get from a loan will last at least as long as the repayment of the loan takes. The lifelong dream of a trip around the world can be a reason for a loan, as can the purchase of a very special device. Ultimately, it depends on how important the reason for the possible borrowing is to you.
Make a provider comparison
Many car dealers offer you car financing directly. Your house bank also likes to come around with a new loan offer every now and then. But if you want to make sure that you really get the best conditions, you should definitely make a comprehensive loan comparison. The best way to do this is to use a comparison calculator on the Internet, such as you can find here at Good Credit.
In addition to the loan amount and the planned term, you can also specify the planned use and thus select the suitable loan offers for your needs. With the offers that you receive, you should pay particular attention to whether the loan offer is tied to creditworthiness and whether the effective interest is stated directly. With offers that are dependent on creditworthiness, you need a specific offer that is tailored to your financial situation.
Check whether you really need residual debt insurance
Residual debt insurance can make sense – but it is definitely a costly affair. Residual debt insurance is particularly important if
- long terms
- high loan amounts
- Children in the household
are. In these cases, residual debt insurance can make a lot of sense. With short loans with a comparatively low loan amount, you can save a lot by not taking out residual debt insurance.
Good CreditS Tip: Taking out life insurance in the sum of the loan for the term of the loan can sometimes be significantly cheaper than corresponding residual debt insurance.
Choose the loan term wisely
The loan term is usually determined by you as the borrower. The term is a key factor in the question of the rate. The interest rate is often also dependent on the term. Before taking out an online loan, check what amount you can afford each month and how long you want to repay your installment loan.
You should not set the monthly rate too low – for example, due to an unnecessarily long term – as this can increase the total loan costs due to higher interest rates and longer interest payments. However, your rate should also not be set so high that you no longer have any financial leeway.
Pay attention to your credit rating
Long before you take out a loan, there are a number of things you can do to help you get a lower interest rate if you need a loan. The most important thing is to pay attention to the evaluation of your credit rating. To do this, you should get regular information from Schufa.
Check whether outdated or incorrect entries can be deleted. You can also use the existing entries to see what you can do to improve your credit rating. This can include, for example:
- avoid creating multiple checking accounts
- do not use more than one, maximum of two credit cards
- Avoid taking out customer cards with a granted credit line – this is often reported to Schufa as a current loan, even if you have never exhausted the credit line
- always meet your payment obligations in good time
Since most loans in terms of interest rates depend on creditworthiness, you can often achieve a significant reduction in borrowing costs alone if you need a loan in the future.
Avoid the overdraft facility
The interest on an overdraft facility is well above that of a small loan even in times of absolute interest lows. Interest rates of 12% and more are not uncommon here. If you are therefore planning an acquisition, you should under no circumstances pay for it from your overdraft facility, but rather apply for a corresponding small loan. You can find a wide range of providers here in our loan comparison.
Use the option of special repayment
You only pay interest on the loan amount that you still have to repay after the last repayment. You can significantly reduce the total loan costs if you make special repayments with a certain regularity. Even if they are only amounts in the amount of one or two monthly installments, these can ultimately lead to a significant reduction in the loan term and thus the total loan costs incurred. You can find detailed information on this here.
Good Credit Tip: If you are planning special repayments, you should take this into account when selecting the lender. Not all banks and credit institutions offer this option.
Check the possibility of debt restructuring with a certain degree of regularity
Have you taken out a loan with a comparatively long term? Then you should consider the possibility of debt restructuring with a certain regularity, but especially if something has changed in your circumstances.
Check, with the help of our credit comparison here on Good Credit, whether you can find correspondingly cheaper offers. If so, you should not be afraid to take the step of debt restructuring. Read more about meaningful debt restructuring here.