Actually, one would think, is a loan, with the exception of mortgage lending, always for free use. “Make your dreams come true” or “Fulfill your wishes now!” Are the slogans of the bank. But how do the banks want to know what customers want? Against this background, many borrowers assume that a loan for free use is standard. He is too, but there are exceptions.
The earmarked loan
The most common variant that dictates a particular use of the loan amount is car loan. Car loans are usually cheaper than a loan with free use. The car buyer must therefore prove within a certain period of time that he has acquired a vehicle with the money. This usually happens by sending the car letter. If the bank keeps the letter in hand, it is easy for them to sell the car if the borrower no longer meets his payment obligations. With a fitted kitchen this would be harder. This advantage in the realization of collateral is provided by the banks with interest rebates to customers.
Another earmarked loan is the “home loan”. This loan is only available to real estate owners for residential purposes. The advantage is that no liens have to be made. The interest rates for these loans are between classic installment loans and the interest on mortgage lending.
Finally, the loans remain at the “POS”, retail. These are directly related to the purchase of a product, be it furniture or a television.
The loan for free use – what to look for?
If you want to balance your account or go on holiday and need a loan, you will usually use a credit comparison to find the cheapest deal. The order is based on the cheapest interest rate that the provider identifies. But beware: If it is credit-sensitive interest, the order of the providers can move very quickly. The reason for this is the different weighting of the banks with regard to the creditworthiness criteria. Fall under it
- marital status
- private credit entries
- Industry and employer
- Other loans
Especially at the address, the ratings of the banks are quite different. Some institutions also base their classification on how many loans were not properly served in their postcode or extended neighborhood. The applicant has no influence on this, but suffers in case of doubt. If the bank waives interest-based interest rates and offers interest to all, only the personal credit check is used.
Against the backdrop of interest-based interest rates, it therefore makes sense to ask a number of banks for a corresponding request. The time required is relatively low, on the private credit this has no effect. However, in most cases the customer already knows, within a few seconds after sending the request, what interest he has to reckon with which bank for his credit for free use.
Further selection criteria for the loan without purpose
The average duration for a consumer finance is 42 months, for a new car 62 months. It can not be ruled out that a borrower will have a greater amount of money to use for the full or partial settlement of his loan before it expires.
It is becoming increasingly popular for banks to forego a prepayment penalty, meaning that the customer does not have to pay a “penalty” for early repayment. The prepayment penalty amounts to one percent of the remaining debt for a remaining term of more than twelve months, and 0.5 percent in less than one year. Many institutions offer at least once a year that the borrower may repay a certain percentage of the remaining debt without compensation.
On the other hand, it may well happen that the borrower has a tight financial life. Classic times for young families is the time before the holidays or the pre-Christmas period. Anyone who knows before the signing of the contract that this situation is likely to occur, is well advised with a loan, which provides for contractual rate breaks. In this case, the borrower can easily pause for a month with the repayment of the loan without much fuss or negotiation with the bank.
Loan at your disposal – installments, maturities and loan amounts
The range of loans without purpose is quite broad. Some banks set a floor of € 1,000, others of € 5,000. Depending on the institute, the maximum loan amount is between 50,000 and 100,000 euros. For the maturities, in most cases, a minimum term of twelve months applies. A duration of 120 months as a maximum duration is rather out of line.
It is more convenient than a term of twelve months, if the borrower can choose his desired rate of credit for free use. The bank derives the term of the loan from this. More and more institutions also offer maturities of, for example, 33 or 57 months, ie a continuous repayment period.
Anyone who needs a loan of 12,300 euros, had until some time ago to clarify the question of whether he takes a loan for free disposal over 12,000 euros or over 13,000 euros. This is now a thing of the past for many banks, as they allow graduations in increments of 100 euros.