Cheap online credit

Processing fees, withdrawal fees and a good interest rate on top of it – a loan is often an expensive pleasure. After all, the banks live on it, especially in times of crisis, their business is secured. But nobody has to come to terms with it: A cheap online loan can save a lot of money.

Direct banks offer low effective interest rates

Direct banks offer low effective interest rates

The banks obviously not only live fairly well on the income from loans, they also have to bear a lot of costs. For example, the dense network of branches with offices in small towns or advertising. In the end, the borrower also pays these bank expenses to a certain extent with its loan interest. Direct banks on the Internet have it much easier. You waive most of these costs, but usually no advice is offered.

The debtor should therefore be able to realistically assess how high the rates are that they can pay each month. But because a cheap online loan is only available with a good credit rating and without a negative credit entry, this risk of over-indebtedness is limited. Banks see their own capital at risk early on and typically only lend when the prospects for reliable repayment are very good.

Advice is not required

Advice is not required

However, the debtor is completely on his own if he is to compare the different loan terms. The effective rate is the most meaningful. This includes not only the loan interest, but also all fees. The only exception: A frequently requested residual debt insurance, which secures the payment in the event of disability or unemployment, can cause enormous additional costs. By specifying the effective interest rate, loan costs are still quite easy to compare. Nevertheless, care should be taken to ensure that the share of fees in the interest rate is not too high. Because, for example, a payment fee is charged at the beginning – then the loan starts with costs.

Credit comparison easy and fast

Credit comparison easy and fast

A cheap online loan has the advantage that many offers can be obtained very quickly on the Internet. This means that many different providers can be compared with each other in a short time. Many lenders particularly advertise creating an offer within 24 hours. Because personal data is requested to calculate the conditions, special caution is advised. Some dubious providers use this data to their advantage, frequent advertising emails are the least evil.

Black sheep can be identified by conspicuously low interest rates or the requirement to pay a fee in advance. About 6 – 8% should be taken into account for small loans around 5000 dollars. This rate can be undercut if the income is very high and the repayment is correspondingly quick within 12 months. The longer the term, the more uncertain the interest rates can be calculated by the bank – for security reasons, they are slightly higher for the debtor. Such loan amounts are usually still approved if the income is above the garnishment limit and the credit gives the green light.

On the other hand, the situation is different with higher sums: direct banks also demand countervalue in the form of security. This could be a property or a young car, for example. This security covers the risk that the debtor will no longer be able to meet his credit obligations. Because a credit risk that is secured with a house, for example, is very low, the interest rates for building money are also particularly low. A cheap online loan is a real win.

Credit agreement: you should know this before signing!

You may have just moved into a new apartment and bought furniture for a lot of money or invested in a new computer. You looted the household budget for these new purchases, but now important equipment breaks down: for example, the washing machine runs out or the car no longer starts! So what to do when there is no money left to bridge the gap? As a rule, only a loan can help here.

Even if you would prefer to take out a loan as soon as possible – it is important to first think about a few things: How much money can you repay each month? How much should the loan be and how quickly do you want to repay the loan? At best, only contact a bank if you have answers to these considerations. This enables you to search more specifically for a suitable loan and to check more precisely which framework conditions the loan contract should contain.

Be honest: First, assess yourself realistically

Before you go to the bank, you should draw up a financial plan in which you compare your household income and your monthly fixed and variable expenses. This list enables you to determine which total financial burden you can handle. How much money is actually left at the end of the month and can therefore be used to repay a loan?

The basic principle is: be realistic! As a rule, a loan is cheaper the faster it can be repaid, since a shorter term often means a lower interest charge. Nevertheless, it is of no use to either party if borrowers overestimate themselves and ultimately cannot pay the excessively high rates. If renegotiations or even a second loan are necessary, this essentially means additional costs for the borrower.

So do not calculate too tightly, so that a small change in your household income (e.g. temporary short-time work in the company) or other spontaneous cost factors do not lead to payment difficulties. With these considerations, it is also important to include cost items that are due only a few times or even only once a year, such as refilling the oil tank or car tax.

Advance information: You should know this about the loan agreement

Advance information: You should know this about the loan agreement

If you contact a bank with a loan request, you should receive all the essential information about the loan contract in a standardized form in good time before concluding the contract. The provisions and rights listed there apply across Europe and make it easier for you to compare several loan offers with one another, since you can use this form as an information basis. In any case, the following points should be listed there:

  • Exact name of the loan
  • Full amount of the loan
  • Borrowing rate
  • running time
  • Repayment options
  • Effective interest rate
  • Total costs for the borrower: accruing loan interest and interest payments
  • Possibly. accruing expenses for services, for example for the written information about current remaining debt

Regardless of whether you ultimately conclude a loan contract with the bank in question or not, the information sheet must still be provided free of charge. In addition to this, you can also have a preliminary draft contract sent to you free of charge.

Take special and repayment rights into account

As soon as a loan agreement has been signed, it is valid. As this usually means a long-term responsibility, you should read the contract terms carefully before signing and check all the information contained there for their accuracy. At best, you should also keep an eye on personal factors: In the future you may receive payment for life insurance, a building loan contract or another asset: Be sure to take such contingencies into account before the actual loan agreement. In this case, you should definitely have the right to special repayments guaranteed in writing in the loan contract, so that you could reduce the term and thus also accrued interest payments.

Lender’s Obligations

Also pay attention to the obligations of the lender: This includes, for example, a detailed explanation regarding the contractual provisions. As a loan applicant, the bank must explain to you the main features that are set out in the loan agreement and also have possible effects : What are the consequences of a possible delay in payment? Is it possible to suspend a few installments in the event of financial bottlenecks? What are the fees? Furthermore, the bank is obliged to regularly send you a repayment plan that informs you of your current payment status.

Thanks to legal changes, fees are eliminated!

The Consumer Credit Act (VkrG) came into force in Austria on June 11, 2010, which applies to all credit agreements with amounts in excess of USD 200. As a result, the credit contract fee was abolished in 2011. To date, this was a statutory fee of 0.8% and 1.5% of the loan amount, respectively, and made loans more expensive accordingly. Since this abolition, processing fees for consumer loans have also been prohibited.

Concluding a loan contract is therefore free of charge, but the loan itself always entails costs in the form of interest. These costs depend on the individual loan agreement and sometimes also on the type of loan: As a rule, banks base their loan interest on the current market economy. For example, at certain times a mortgage loan can be cheaper than one without a purpose. Since interest rates fluctuate constantly, you should get an overview of the market and compare the existing offers before taking out a loan.

You have decided: This is how the contract is concluded:

You have decided: This is how the contract is concluded:

The decision was made after carefully reviewing many loan offers and you selected a specific loan agreement. If the bank received the contract with your signature, it is valid. The lender will then send you a copy of the contract, including the general terms and conditions, incidental expenses and credit indicators.

Now it is time to wait: it is possible that the loan will reach your account after a few days. However, it can also take up to a few weeks until the bank concerned has completed the bureaucratic effort and can pay you the money. After receiving the loan, the contractually agreed installments are also due.

If something goes wrong: you can withdraw from the loan agreement

If something goes wrong: you can withdraw from the loan agreement

If money is urgently needed, it can be an ordeal to check the loan offers carefully and take the time to calculate realistically. If you have been tempted to prematurely conclude an unsuitable loan contract, you can still withdraw from the contract within 14 days. This period begins on the day the contract is signed. No reasons need to be given for the revocation of the credit agreement. The only drawback: Previously accrued interest and payments already made by the lender may be charged to the customer.

Would you like to cancel your loan contract? Are you sure?

If the 14-day period has expired and you are still unsatisfied with the terms of the contract, you can cancel the loan before the term expires. As a result, however, you have to reimburse the loan amount received within 30 days, including the loan interest accrued to date. If you have already invested the loan you have already received and have no other assets, you will not be able to terminate it accordingly.

However, if you have enough money to pay off the lender, you should definitely quit in writing. At best, send a letter of termination to the lender by registered mail and keep a copy for yourself. Depending on the contractual agreement, a prepayment fee for the lost interest payments may be due. So calculate in advance whether a termination is worthwhile for you or whether you will even end up paying.

Exclude ambiguities

Exclude ambiguities

Regardless of whether it is a large or small loan amount: take the time to study the loan contract carefully and compare the proposed terms with the help of the standard information sheet or draft loan contract. Pay particular attention to the total loan amount and the APR. If you notice any discrepancies, speak to the bank concerned.

It may be a mistake or you have misunderstood something. No matter what makes you wonder, do not conclude a contract without understanding it in detail. Only then can it be guaranteed that a loan agreement takes your interests into account.

Credit card survey: additional services are not important.

One would normally think that the more extensive credit cards are equipped, the higher the acceptance of those offers for credit cards. Unfortunately, a fallacy, as the result of a current, representative of a  survey on behalf of a consumer protection association shows. After all, around 44 percent of those surveyed stated that they were simply not interested in insurance services offered with credit cards.

But even with other special services such as discounts for flight and hotel bookings or general shopping benefits, the demand is kept within a manageable range. With a 37 percent rejection on the part of the respondents regarding these advantages, this is also a clear sign that a market interest is assumed here that in reality does not seem to exist. The question arises: What do Germans expect from a good credit card?

Transparency of credit card costs are more important

Transparency of credit card costs are more important

If the current FORSA survey is used to answer this question, it can at least be stated that any kind of additional services are obviously only being accepted to a very limited extent. What users of credit cards, on the other hand, are most interested in is the generally expected costs. The main points are:

  • Does the bank charge an annual fee for the credit card?
  • What are the domestic and international costs for paying and withdrawing cash with a credit card?
  • What is the APR on my revolving credit card?
  • Is there an installment payment option?

Quite a matter of course, which should be anything but difficult to answer. But obviously this is exactly the case. Because, according to the study, consumers are particularly unsatisfied with these questions. Around a third of the respondents from the FORSA study are dissatisfied with the available price and cost overviews from the credit card issuers. The criticism of consumers focuses on the lack of transparency and traceability of credit card fees.

Credit card comparisons do a better job of providing information

Credit card comparisons do a better job of providing information

What is interesting, however, is that credit card comparisons available on the Internet are very important to consumers. Consumer advocates also generally recommend making use of these online comparisons in advance of ordering a credit card. Thanks to these comparison portals, it is finally possible to get a comprehensive overview of the numerous credit card offers. In addition, the individual offers can be compared both individually and in total. The information generated in this way can subsequently be a valuable decision-making aid. After all, nobody wants to pay money for additional services that are ultimately not needed or desired.