Consumer credit is a widespread installment loan. It is mostly used by the consumer for an important purchase and is applied for either at a bank or the seller. Many Germans use this type of loan, which is often based on the type of balloon financing.
Calculate well and keep an overview
The sum required is the price of the product to be purchased. The repayment is made using the same monthly installments. Typically, the borrower says what regular payments they want to make possible. The bank then determines the loan term from the debtor’s creditworthiness and the current interest rate level. As a rule, the consumer only needs to present an identity card and income certificate. The term of such loans is usually between 12 and 84 months. With a long term, the rates become smaller, but the interest burden increases. It is possible to take multiple consumer loans. Then the customer must always keep an overview.
- Plan your monthly living expenses exactly
- Calculation of the possibility for possibly several consumer loans
- Overview of monthly payments
The sales company of the desired product does not always give the cheapest consumer loan. It is important to compare. Maybe your own house bank has better conditions or there is also the possibility of a cheap online loan. Consumers often accept the offer of the department store or the car dealership because it does not have to be tedious research. Sometimes a consumer loan from another lender can save huge sums over the entire term.
The widespread balloon financing
Consumer loans with a closing rate are popular. With balloon financing, which is often referred to as final installment financing, high purchase prices seem to be effortlessly convertible into convenient installments. That is why balloon financing is considered a close “relative” of the leasing. The model is easy on the monthly budget and enables many types of financing. In general, balloon financing is not considered a “credit bargain”, but it is still suitable for low-income consumers. The low rates enable the final amount to be saved independently and do not burden the monthly income as much.
This is how balloon financing works
Balloon financing is used for cars and high-quality consumer goods. A partial deferral of the loan amount will reduce the current monthly installments. There is little or no down payment. The calculated residual value of the product is recognized at the end of the term as the final final rate. They are not redeemed during the term. However, the interest for this still applies. Even if the term, loan amount and interest rate seem ideal, the total cost of the final installment financing is considerably high. A majority of consumers underestimate this effect because the apparently low rates are deceptive. However, final installment repayment may also be possible with the sale of the consumer goods purchased or follow-up financing. This practice is used primarily in the auto business.
A consumer loan can make the path to the new car unproblematic. Despite the apparently favorable terms of the contract, consumers should include credit offers from other providers in their comparison. A lot of money can often be saved here in the long run.