Personal loan – the alternative to bank loans
A loan is a temporary transfer of capital or purchasing power. However, there are different types of loans. Basically, a distinction can be made between bank and personal loans. While a bank loan, as the name suggests, is granted by a bank that charges interest on the amount borrowed, a personal loan is granted by a private individual who may also charge interest as compensation for the waiver and the risk that arises for them .
Explanation on personal loans
However, one problem that arises in lending to non-commercial individuals is the borrower’s credit check. Internet portals in cooperation with banks bring borrowers and lenders together and minimize the risk of the lender by checking the creditworthiness. This type of lending is also known as peer-to-peer lending.
Do not confuse – personal loan and loan from private
The term “personal loan” is not clearly defined.
Banks speak of personal loans if the purpose of the desired amount can be freely chosen and is not tied to a vehicle, real estate or other object and can be used for any private purpose. Personal loans may not be used for commercial purposes. The ING installment loan is suitable for a loan for free use.
There are also loans from private individuals that are referred to in the same way. The borrower borrows money from another person with no credit institution involved. The terms are freely negotiated between the parties. Compared to a personal loan, the overall conditions for loans from private are often worse. The repayment options for borrowers are not particularly flexible and the additional costs are often higher.
Loans without private credit
The granting of loans without private credit is possible, especially with loans from private, but is usually not recommended. The lender cannot assess the creditworthiness so well without a Schufa query and must rate the default risk higher. The interest rate for loans without private credit is often significantly higher than for a conventional personal loan from a credit institution. In addition, the lender sometimes requires extensive documents to check the creditworthiness of the borrower. This delays the processing of the loan request and the disbursement of the loan takes longer.
What do I have to look out for when comparing loans?
When comparing different loan offers, some points are particularly important, which we will present to you in more detail below.
Effective and debit interest
The debit or nominal interest rate denotes the interest rate that must be paid on the capital raised. It does not include any additional costs that may arise in connection with the loan. The effective interest rate includes all costs associated with the loan, with the exception of any account management fees. The decisive factor when comparing different loans is the APR, which is always higher than the borrowing rate.
Depending on the contract, borrowers have the right to redeem part or all of the loan prematurely at no additional cost. Ideally, the loan can be redeemed at any time without a prepayment penalty. Possible repayment breaks in the event of financial bottlenecks are also recommended.
Monthly rate and term
The amount of the monthly installment depends mainly on the term. The longer the loan is repaid, the lower the monthly rate will be. When comparing different loan offers, only offers with the same term should be considered.
Reviews and tests
The Finanztest foundation and large consumer portals regularly test the credit conditions and service quality of various credit institutions. Good results in the tests indicate competent and extensive advice and favorable credit terms.
Withdrawal time and processing fees
The disbursement time of the desired loan and any processing fees are also important. While banks and credit institutions have no longer been allowed to charge processing fees for loan applications since 2014, there are intermediaries and online platforms who charge a fee for preparing offers. In addition, the disbursement of the loan should not take too long. A processing time of several weeks is unacceptable.
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