Take Control Your Finances Right Away

Credit equals credit, doesn’t it? Not even close! For this reason, you should think about the right loan for you. In our loan comparison, you specify the loan amount, the provider gives you an interest rate and a repayment rate. Then you take out the loan – or not. However, lending is not that easy. This is only the first step towards your new loan. It takes a bit more until the loan is approved and finally credited to your account.

There is one type of credit with which you can fundamentally hire or pay whatever you have in mind. These are loans without a specified purpose and can therefore be used freely. You can use these pure consumer loans, for example, to settle your overdraft facility, buy a new television from it, or finance your next vacation. The use of real estate financing is usually prohibited. However, there is a simple reason for this: consumer loans are usually up to $ 50,000 (we have banks with higher sums in the loan calculator) and are granted without a mortgage. Since real estate loans are usually significantly higher in the loan amount, most banks also require appropriate land charge protection.

There are also loans that have a specific purpose and are also linked to it. These are, for example

  • Car Loans / Motorcycle Loans
  • rescheduling loans
  • modernization loans

A distinction is also made between loans with interest dependent on creditworthiness and loans with interest independent of creditworthiness (so-called fixed-interest loans). Here it is important to consider which loan is really suitable for you in the end.

Capital Lender Tip : Take a look at our loan comparison – here you will always find the very cheap loan offers for the credit types mentioned. You can use the loan calculator as often as you wish. It remains free of charge for you and 100% non-binding. However, please note that you will only receive your individual interest rate after applying for a loan. This loan application is also 100% free and non-binding for you!

Four types of credit and what makes the difference

Four types of credit and what makes the difference

As already mentioned, the cheapest loans can be filtered out for four loan types. Each of these types of credit has its own advantages and disadvantages and certain idiosyncrasies in the regulations. Below we present some of the types of credit to you in more detail.

  1. Car loan and motorcycle loan
  2. Consumer or online credit
  3. Debt rescheduling loan
  4. Modernization or renovation loan

1) Car loan

A new car is often an expensive pleasure. Depending on which vehicle you choose, the costs can quickly go into the middle five-digit range. If it is a large family car, a chic sports car or a modern electric car, it can quickly become expensive.

Only a few people can raise such a sum at once and pay the vehicle in cash. But that would actually be the most sensible option when buying a car. If you act as a cash payer, you will usually receive additional discounts and discounts. However, since many consumers finance their car, numerous car dealers now work with a contract bank that enables car financing directly on site. But does it really make sense to use the financing directly from the dealer? Wouldn’t a car loan comparison be necessary to find the best deal?

With a car loan through Capital Lender this is possible. You take out your car loan, receive the full purchase amount of the vehicle and pay your vehicle in one amount. As cash numbers, it only depends on your negotiation skills how much discount you can negotiate. In any case, you saved on the car loan interest with our comparison. However, before you get the loan paid out, the payment is subject to different conditions.

On the one hand, the granting of a car loan is earmarked. This means that you can only use the money from this loan to buy the vehicle. The purchase must subsequently be proven by a purchase contract.

In most cases, the lending bank also requests the vehicle letter of the financed vehicle as security. In the meantime, you can also find numerous banks in our loan comparison that do without this additional security.

Advantages and disadvantages of a car loan

Car loan benefits:

  • since there is additional security, the interest rates are often cheaper than with a pure consumer loan
  • the credit gives you the opportunity to act as a cash payer when buying and to negotiate more favorable purchase conditions

Car loan disadvantages:

  • the loan is earmarked and cannot be used freely
  • Many banks require the vehicle registration document as additional security until the loan has been paid off in full
  • in the case of used vehicles, the lender may impose certain conditions on the award (e.g. maximum vehicle age)

By the way: The same advantages and disadvantages apply to a motorcycle loan as to a car loan. Ultimately, the only difference is the fact that a motorcycle is financed by a two-wheeler and the purchase price is usually lower.

When choosing a loan, a distinction can also be made between full repayment (classic annuity loan) and a balloon rate (more on balloon financing). A full repayment loan is paid off in full monthly installments until repayment is complete. The variant with a balloon rate comes with significantly lower monthly rates. In the end, however, there is a large final rate. This is usually chosen so that the balloon rate corresponds to the expected value of the vehicle at this time. This gives you the opportunity to trade in the vehicle at the dealer without major losses in order to purchase a new vehicle from the dealer.

2) Consumer or online credit

Classic consumer credit (also known as online credit only) is not tied to a specific use. In the end, with the money from an online loan, you can do what you want. Classic reasons to take out consumer credit include:

  • a wedding (with a wedding credit) or other large family celebration that needs to be paid
  • the purchase of a vehicle if no car loan is an option
  • funding training
  • the purchase of technical equipment
  • the purchase of furniture (e.g. with a furniture loan)
  • buying a new kitchen (e.g. with a kitchen loan)
  • the settlement of an open overdraft facility
  • the payment of a trip (e.g. with a holiday loan)

With classic consumer credit in particular, it is important to think about it beforehand. Do you need the loan at all? If yes, in what amount? What can you actually afford? The disadvantage of consumer credit is occasionally lower interest rates. With a second borrower or with additional collateral, you have the option to reduce the interest rate a little. Please also read our 9 tips on how you can reduce your loan costs.

The pros and cons of consumer credit

Online credit benefits:

  • there is no specified purpose
  • You can use the money immediately or use it as a reserve
  • in most cases, a credit decision is made very quickly
  • the interest is significantly lower than that for a credit facility
  • can serve as a “fall-back option” if, for example, a car or motorcycle loan is not granted

Online credit disadvantages:

3) Loan for debt restructuring

Another option is to take out a loan for a debt rescheduling. Such debt rescheduling only makes sense, of course, if the terms of the new loan are better than those of the old loan. Even with a good credit rate, debt restructuring can make sense. For example, if you have a shorter loan term on a new loan, you will save a lot of costs in the end and have also repaid your loan faster.

It is important that the new debt rescheduling loan has a lower effective interest rate. In addition, you should consider possible additional costs of the loan repayment. If there is no possibility of a special payment or free transfer with the original loan agreement, it can quickly become expensive through prepayment fees, which would make the rescheduling no longer worthwhile.

4) Modernization loan / renovation loan

A modernization loan falls into the area of ​​construction loans, but is not a classic construction loan. A complete house or the purchase of an apartment is financed within the framework of construction financing. With a modernization loan, you only finance a planned modernization or renovation.

For this reason, no entry is made in the land register with this type of loan. However, a modernization loan is very well earmarked, so you have to prove the use of the borrowed money accordingly. The classic modernization loan usually comes with a significantly lower interest rate than the consumer loan is freely available. However, it is only aimed at property owners. This means that you have to prove that you own an apartment or house in order to receive such a modernization or renovation loan.

The advantages and disadvantages of modernization or renovation loans

Advantages of modernization:

  • no entry in the land register is necessary
  • lower interest rates than a consumer loan
  • sometimes significantly longer loan terms possible
  • This means that modernizations are possible that significantly reduce running costs (e.g. electricity and heating)
  • Parts of the credit rate can already be financed through the corresponding savings

Modernization loan disadvantages:

  • clear earmarking of the loan
  • Credit is only granted to property owners

Loan with or without interest based on creditworthiness

Loan with or without interest based on creditworthiness

In our credit comparison on Capital Lender there are numerous offers with interest rates that have “ from-to-information ”. These are so-called interest rates dependent on creditworthiness. This means that the lender checks your credit rating and determines the interest rate based on the respective result. The better your credit rating, the lower the interest rate.

The higher your income and the lower your monthly costs, the greater the security for the lender. The customer must weigh up in advance how safe it is that the loaned money will be paid back. Therefore, in the case of interest rates dependent on creditworthiness, the interest rates sometimes go very far below the interest rates of fixed-rate loans. However, this only applies to top ratings in terms of creditworthiness and account rating.

Credit-independent interest never reaches the lowest offers of credit-related interest. Instead, they tend to be in the lower middle of the interest margin. But they are completely independent of your credit rating. This means that the top earner pays the same high interest rate as the low earner.

Of course, this means a higher risk for the lender. The risk is somewhat offset by an average higher interest rate. As such, the credit check as such is generally carried out much more intensively and strictly in the case of interest independent of creditworthiness. This is to further minimize the risk for the lender.

You will not find blatant interest rate differences in our loan calculator. Of course, the “ advertising interest ” looks very tempting; if only everyone would get it. Banks are therefore required to provide a representative example of their loans. These are the loan terms at which 2/3 of the customers received the loan from the respective bank. If you compare this interest rate with a credit-dependent loan and a fixed-interest loan, you will find that the interest rates are very close to each other!

Type of loan benefits disadvantage
credit ratings – lower interest rates with a good credit rating
– Even with poor creditworthiness, there is more of a chance to get a loan
– Even with mediocre creditworthiness, the interest is comparatively high
creditworthiness independently – basically constant creditworthiness
– clearly predictable costs already in the offer phase
– here there is more of a risk that the loan application will be rejected because of poor creditworthiness

Borrowers should choose a credit-dependent loan if they have a very good or borderline bad credit rating. Loans that are independent of creditworthiness are best suited for all persons with a medium income. Here, the interest rates are generally lower than for most credit-dependent rates for ordinary earners.

Conclusion: high savings potential with many loans

Conclusion: high savings potential with many loans

Even small details can make a big difference in credit costs. When buying a car, for example, it is very important whether the vehicle is financed with a consumer loan or a car loan. The same applies to a modernization or renovation loan. However, there are also situations in which you are blocked from accessing the respective loan types. This applies, for example, if you want to buy a used car, but its age and condition do not meet the criteria of the potential lender. Then consumer credit is the perfect way to get hold of it.

In any case, you should make comparisons before entering into a loan agreement. This is definitely recommended between the individual loan types. This is the only way to ensure that you end up with exactly the loan that is most suitable for you over the entire term.

Leave a Reply

Your email address will not be published. Required fields are marked *