Loan interest comparison, info, calculation and differences

Anyone claiming a loan from a bank must pay interest on this. The amount of interest varies greatly depending on the provider. A comprehensive comparison is essential for consumers if they do not want to pay too much for their credit unnecessarily. In this article you will learn how interest rates are structured for the different products, how you can influence the amount of interest, which providers are cheaper and how repayment works.

Loan with interest margin or fixed interest rate?

loan with interest margin or fixed interest rate?

Loan differentiates between the following variants:

Credit-dependent loan: After your loan request, the bank checks your personal creditworthiness and financial situation. The better your scoring and the more likely a full loan repayment is from the bank’s perspective, the lower your loan interest. In comparison tables, creditworthiness-related loans are usually shown with an interest margin, eg “3.00% to 8.50%”

Credit-independent loan: These types of financing are often called fixed price loans. The amount of the loan interest is not based on your personal creditworthiness. The bank offers an installment loan with a uniform interest rate for all customers, for example 4.75% pa If such a loan is applied for, the bank also checks whether a repayment is likely. If a positive decision is made, you will receive the previously fixed interest.

No general statement can be made as to which of the two forms is fundamentally better or worse. Use your personal financial situation to make your decision. If you are financially well positioned, ie you receive a regular income, have no negative Schufa entries and collateral like your own house, the loan depending on creditworthiness is usually cheaper for you. If you assess your personal situation rather than average, the fixed interest loan may be the better alternative for you.

Influence on loan interest

Influence on loan interest

The level of interest on your loan depends largely on your financial situation and the structure of your loan application. You can influence the granting and the amount of the loan interest with the following measures:

  • Term: Terms of 12 to 84 months are common. The shorter the term of the loan, the cheaper the offer is generally. If you are planning a repayment over a longer period of time, the risk for the bank may increase. This risk is calculated using higher lending rates. Important: do not overestimate yourself. If you plan a short term with high monthly installments that you may not be able to service permanently, the risk of a loan rejection increases.
  • Total: Small amounts of loan are usually given at a lower interest rate than high loan amounts. A small loan is not as important for a default at the bank as a large loan amount. Here it is important for you to make sensible calculations and to request a realistic loan amount.
  • Purpose: You can usually use an installment loan for any purpose. However, if you are planning to purchase a car or property, applying for a special loan for this financing is often cheaper. The car or the property serves as security for the bank.
  • Creditworthiness: The most important point, which on the one hand determines whether you get a loan at all and if so, on what terms, is your personal creditworthiness. There is no general answer to which factors and with which weighting are taken into account by a bank. Each provider sets different priorities here. As a rule, a bank checks your income, the security of your job, where you live, the amount of your assets, whether you have children and are married.
  • Security: The more security you can offer a bank, the lower the loan interest will be for you. A (almost) fully paid property, a secure job or other valuables can serve as security. An additional applicant (eg your spouse) or a guarantee is also rated positively by a bank.

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