The credit line is one of the features of most checking accounts and represents a sensible solution for the short-term bridging of an extraordinary need for money. However, due to the high debt interest, on the extent to which the compound interest effect also has an effect after each quarterly interest calculation, not recommended.
Installment loans: Find out more
Account holders only have to apply informally for their credit facilities once, if the bank does not even grant them the discretionary framework on their own. When calculating the amount of the discretionary credit, most financial institutions use a simplified procedure whereby they generally take into account all regular non-cash payments received. In the case of an installment loan, on the other hand, many financial institutions only take into account the earned income from the main activity and no additional income. At the same time, there is no repayment obligation for the use of the Dispos, but the bank customer can balance the account balance as desired wholly or partly.
In practice, the negative balance temporarily decreases significantly after the monthly salary increase. For this reason, the savings calculation between the credit line and the installment credit cannot simply be made on the basis of the different interest rate and the maximum amount used. Rather, the temporary reductions in the amount of the debt are to be included in the calculation. Since the amount of the disposition credit differs depending on the bank – often even within a financial institution depending on the accounting model – it is recommended to specify an average saving. With frequent use of an availability frame of 3000 euros, this amounts to between 300.00 and 400.00 euros within three years.
Decisive for the possible saving is the amount of the disbursement interest and the favorable installment interest rates as well as the period, which passes between the salary entrance and the debiting of most expenditures from the giro account. In the case of a current account settlement, it is worth taking a look at the interest rates for the credit line, especially as individual banks provide a disposition exemption limit. In this case, the use of the discretionary framework takes place without any interest up to the specified amount. If the exemption limit is exceeded, however, the usual interest is charged on the total amount.
While the bank adjusts the interest rate for the credit line if interest rates change, the interest on an installment loan does not change. The adjustment of the interest rate does not necessarily result in an increase, but possibly also in a reduction of the interest rate.
Find a cheap installment loan to replace
The house bank must actively offer its account customers long-term heavy use of the emergency loan an installment loan. This obligation often disappears, as the balance of the account immediately after the receipt of salary falls short of the limit of substantial utilization of the discretionary framework for a short time. In addition, the installment loan offers the house bank is almost always less favorable than the cheapest on a loan comparison to find the installment loan.
Customers will find the cheapest installment loan through our Personal service. The loan amount includes at least the amount of the utilized credit limit. If additional acquisitions are planned within the next six months, their inclusion in a single installment loan is recommended. A credit comparison shows that different banks reduce the interest rate of the consumer credit if the customer uses it for the account balance. In this case, credit seekers will compare whether a competitor bank may lower the interest rate on loans for free use.
With a few exceptions, credit institutions request the submission of current bank statements as part of the lending process. They reject the loan request when the bank account is overdrawn. In this case, the utilization of the agreed on the credit line does not constitute an overdraft. As such, only the exceeding thereof is considered. If the debit balance is higher than allowed, it is essential to reduce it before applying for credit.
The loan comparison shows installment loan offers with fixed interest rates for all borrowers and loan offers with credit-based interest rates. Each bank carries out the credit rating according to its own criteria, whereby the Schufa score is usually a large part of this. Creditworthy loans are generally available to those who are above average creditworthiness, while bank customers with average creditworthiness choose bank loans with fixed interest rates for all customers.
Choose a sufficiently long credit period
While the bank customer can repay a credit at will, the installment loan is associated with a fixed repayment plan and regular monthly installments. Their amount depends on the loan amount, the interest rate and the repayment term. The latter can freely choose the loan, with most banks only offer maturities over whole years. It makes sense to try out different repayment terms at a credit comparison on Direct Adviser and to see the total costs as well as the monthly installments. For very short credit terms of twelve to twenty-four months, higher effective loan interest rates are sometimes incurred than for longer repayment periods, as the bank has to spread the installment loan costs down to a few installments. Although it may no longer charge processing fees for installment loans, it may establish differently high effective loan interest rates depending on the term.
The decision for too short a credit period and thus a rather high monthly rate is associated with the risk of having to resort again to the credit line for part of the repayment. Although the possibility of claiming it after the account settlement continues to exist, the continued use of the discretionary framework is not recommended except for bridging a short-term financial bottleneck.
The detailed credit comparison on Direct Adviser shows not only the effective annual interest but also the other terms of the individual loan offers. The ideal installment loan allows early repayment without restrictions and without prepayment interest being calculated so that the borrower can opt for a long term and repay the loan for any amounts available earlier than necessary under the loan agreement.