“Loan with 3.5% APR”, “Loans without Credit bureau” or “Immediate financing for everyone”. Many companies advertise this or similar with low interest rates and quick approval of loan applications.
Interest rates for ordinary consumers much higher than in advertising:
For the standard consumer , a loan is usually much more expensive than stated in the advertising. The interest and other favorable conditions generally only apply to the optimal model customer. Anyone who deviates from the bank’s preferred customer has to pay interest premiums and offer extended collateral (e.g. the bank is often no longer satisfied with a garnishment of the wage, but you also have to have a guarantor for the loan).
Another trick: the banks only advertise with the nominal interest rate. However, this only contains the pure costs for the loan and no additional costs that the customer has to pay. The bank does not have to factor in cost factors such as account management, processing fees, fees for the valuation of collateral or residual debt insurance.
Residual debt insurance is usually unnecessary and makes financing expensive
Many lenders try to bring this insurance along with the loan to the man / woman. It is supposed to replace the loan if you die or become unemployed. It is usually a risk life insurance. This so-called residual debt insurance is unnecessary for most installment loans, according to consumer advocates. Banks still try to sell this type of insurance to the customer because it brings the bank an additional commission. Above all, it makes the loan more expensive for the customer.
Therefore, it is extremely important to always ask the responsible credit advisor in writing for the total effective interest rate and to ask what costs are included in the interest. The effective interest rate contains a large part of the costs and can therefore serve as a rough guide to estimate how expensive the loan really is.
However, caution is also required here: Because with many loan offers, residual debt insurance is not included in the effective interest rate (the bank is not obliged to do this). It is therefore recommended to always ask the bank advisor whether there are any additional costs (such as residual debt insurance) in addition to the effective interest rate.