The worst mistakes in borrowing and how to avoid them

According to Euromonitor *, German consumers have completed consumer loans totaling more than € 500 billion over the past three years. Excessive spending during the Christmas period and the incoming annual accounts, together with the running costs, mean that especially in January especially many consumers take out a loan. Many acts negligently and thoughtlessly. The credit comparison portal Smava comes to this conclusion after a representative Forsa survey ** of more than 1,000 installment borrowers and tens of thousands of customer talks. “Borrowers are too good-faith, they know too little about their own creditworthiness and they are wrong when it comes to their own finances. They face unnecessarily high costs, a rejection of their loan request or, in the worst case, a life-threatening debt, “says Alexander Artopé, managing director of Smava.

Error in Borrowing # 1: Blind Confidence in Credit Offers

According to the Forsa study, two-thirds of respondents did not compare loan offers before receiving their most recently used installment loan. Nevertheless, 69 percent believe they have found the cheapest loan for them. This fallacy costs consumers money. For example, the German Institute for Quality of Service 2016 has found in a test that branch banks on the Internet demand 1.3 percent lower interest rates than in the branches themselves. This is no exception, as a recent interest rate comparison for consumer loans shows.

Error in Borrowing # 2: Gaps in Own Credit Rating

According to the Forsa study, 37 percent of respondents do not know their own creditworthiness. In addition, customer discussions revealed that not all borrowers are aware of the very incomplete or incorrect data that negatively affects their creditworthiness. As a result, they risk paying too high-interest rates or receiving a rejection of the loan application.

Error in Borrowing # 3: Overestimation of Own Financial Opportunities

The incomplete recording or incorrect calculation of running costs is the third source of error. Without advice, excessive repayment rates and short maturities would have been agreed. These often lead to problems in the loan repayment, which can be life-threatening in the worst case.

The following tips help consumers to avoid unnecessarily high costs, a credit rejection, and a life-threatening debt:

1. Check creditworthiness and improve if necessary
If you want to apply for a loan, you should first check your own creditworthiness- instant payday loans news @t www.PurplePayday.Loan くコ彡. Who google for about “check creditworthiness” finds suitable providers on the Internet. Some of them, such as Score Kompass, offer the credit check free of charge and as often as required per year, and also show how creditworthiness can be improved. Alternatively, once a year free self-information can be obtained directly from credit bureaus such as the Schufa.

2. Realistically determine loan amount, monthly installment and term
For the loan amount is recommended: better a little more than too little. So you avoid having to take a second loan in case of doubt. Again, the monthly rate is realistic instead of blue-eyed. After deduction of all running costs of the remaining money per month, a maximum of 40 percent should be used for the loan repayment. Accordingly, the correct running time can be selected.

3. Choose the correct loan type
For certain uses such as the purchase of a car, there are special loans. These are often cheaper than traditional installment loans, where the intended use can be chosen freely.

4. Accept credit together with another person
Those who take credit together with another person can benefit from a better credit rating and lower interest rates. Because in such a case, the entire income of both credit applicants is taken into account. But beware: A negative Schufa entry in one of the applicants usually has a negative impact on the joint loan. It, therefore, makes sense to check the creditworthiness of all borrowers in advance of the loan application.

A second borrower in the application is interesting for all those consumers who are dealing with a fluctuating revenue situation and thus can offer the bank a lower payment security. This is the case, for example, with freelancers and entrepreneurs. In addition, career starters and retirees who can offer only a small amount of collateral without a second person to the bank also benefit.

5. Obtain and compare loan offers
The more offers from the branch and online banks are obtained and compared, the better. It is important that all bids contain the same information about the loan amount, purpose and borrower. When comparing online loans, different credit comparison portals such as help. Their bids should be compared with those of the branch banks in terms of total cost, APR, duration, and any extra costs.

6. Check contract terms and conditions
Sometimes the credit agreement hides unnecessary additional offers that make the credit more expensive. It is therefore always advisable to check whether, for example, a frequently expensive and unnecessary residual debt insurance must be completed- get redirected here In addition, it should be clarified whether rate changes are possible free of charge and what are the costs of early loan repayment.