The following applies to many areas of life: it often turns out differently than you think. As a result, your own savings may not be sufficient if an unexpected expense is pending. If you want to take out a loan, you are often perplexed by the abundance of offers. Here are some tips on what to look for when comparing loans.
Types of loans
The first thing to consider when comparing loans is what type of loan you want to take out. There is a wide selection of short-term loans (so-called installment loans) to long-term corporate loans in the six-figure range. Depending on the type of loan, characteristics such as term, interest rate or repayment rate differ.
There are different types of credit, which differ in amount, term and purpose of financing. In the following we have put together a selection of loan types.
- Construction financing: This is a bank loan that serves the purpose of real estate construction or acquisition. Characteristics of these loans, which also include building society savings, are long terms and high loan amounts. A certain amount of equity capital is also required, which serves as security for the banks.
- Installment loan: This usually means short-term loans with a term of 12 months. The amount of these loans is often low, but the interest is sometimes considerable. Equity is generally not required for installment loans.
- Debt rescheduling loan: A loan is taken out to settle a remaining debt from another loan agreement. The reason is that the terms of such a debt restructuring are more favorable than the original loan.
- Corporate credit: Loans to companies, which are usually worth tens of thousands of euros. The companies use the loans to invest in their infrastructure, for example. The long runtimes often result in long terms.
If you want to take out a loan, you have the option to compare the different options for a loan. Practical online tools allow you to enter various factors and calculate the cheapest offer.
Requirements for a loan
To take out a loan, you have to meet certain requirements. The most important is the age of majority. Only people who have reached the age of 18 may enter into a credit transaction. The second important condition is creditworthiness. By this, the credit institutions understand that you are probably able to service the loan, ie to pay the repayment installments. These conditions apply to natural persons (ie private persons or self-employed) as well as to companies (legal persons).
The creditworthiness is also called creditworthiness. It is composed of various factors that result from your previous business activity. The creditworthiness is determined by service providers who collect data from various positions and use it to determine a score. The best-known company that does this scoring is credit check, which uses a variety of data to determine the likelihood that you will meet your payment obligations. A good credit rating is often necessary to get a loan.
In addition to these requirements, other conditions also apply to various loan agreements. Some agreements require additional collateral such as equity. This depends on the type of loan and the issuing institution.
Find the right loan
In order to find the right loan for your needs, there are several factors to consider. For one thing, you should be clear about what you need the money for. Choose the loan amount so that it is sufficient for your project. If you borrow too much, you may have to pay unnecessary interest.
Then be clear about how much money you have available for the monthly repayment rate. The term of the loan then results from these factors. As a rule of thumb, the shorter the term, the less interest you pay. In return, the monthly rates are higher.
Also consider whether you want to take out a loan with constant installments or prefer one with higher start or end installments. There are certain advantages and disadvantages for each model. Loans with high closing rates are common when buying a car, for example. Be clear whether you can service the higher rates.