Apply for credit

29 Jun

Apply for Credit: New Loans, Repurchase and Repayment

Who wants to apply for a loan, for example, to finance a car or a property or repost an old loan, should not respond to the first offer. Because even in times of low-interest rates, there are significant cost differences between the different banks. It is advisable to take a closer look at the terms of the contract as well as a cost comparison and the review of various offers.

Apply for Credit: These factors affect the cost of the loan

Consumers who want to apply for credit should know that the total cost of the loan depends on several factors. On the one hand, it is, of course, the interest rates that ultimately determine how cheap or expensive a loan is. But in addition, interest rates can rise significantly over time, especially with long-term loans. This can be avoided by a fixed interest rate. In real estate financing, for example, it is customary to agree on a fixed interest rate of ten, fifteen or twenty years. Within this period, the bank may not raise interest rates. However, the banks can pay for a very long fixed-interest period by raising the base interest amount. In the current low-interest rate field, however, it is advisable to secure the favorable terms as long as possible in the case of long loans.

Get several offers and save

Apart from microloans, for example, to finance a vacation or more expensive electrical appliances, it is always advisable to obtain several offers from banks. For the credit institutions assess factors such as credit rating quite different and therefore require different levels of interest. It is also important to pay attention to the fine print. Often the advertised low-interest rates from the advertising brochures of the banks have only a limited connection to reality. If, for example, real estate financing offers a very good interest rate, but only a short interest rate of, say, five years, consumers should be cautious. Experts recommend in such a case rather accept an interest premium but to have longer-term planning certainty.

When applying for credit note: special repayment and residual debt insurance

There are several points in a credit agreement that can increase or decrease the total cost. For example, it is important for borrowers to know whether special repayments of the loan are permitted, whether they incur fees or are capped. For example, if a special repayment is easily possible without additional costs, then the consumer can not only reduce the residual debt faster through interim payments. The interest burden is also reduced.

In addition, there is an integral part of the contract, which can lead to unnecessarily high additional costs, especially with high credit sums: the residual debt insurance. This is a special form of term life insurance, which does not only pay for the death of the policyholder. It may also intervene when the borrower has a significant income loss, for example as a result of occupational disability. The cost of the residual debt insurance but are often considered by consumer advocates as too high. In addition, contrary to the statements of some bank employees, the insurance does not always provide the payment default. The conclusion of such insurance should, therefore, be well considered, especially if you have already taken precautions by a term life insurance or disability insurance.

Out of the expensive debts: Apply for credit and secure low-interest rates

Even if a loan was comparatively cheap at the time of closing, it can change over time. With high loan amounts, such as house financing or the purchase of new cars fall on the one hand already small interest rate differences in weight and can lead to an additional burden of several thousand or even ten thousand euros. In addition: Such loans usually require a long repayment phase. If interest rates are low at the time the PurplePayday loan application is made and, moreover, a fixed interest rate has been agreed, a long-term is no problem.

A few years ago, however, lending rates were much higher than in the current period of low interest rates. The good news for borrowers with expensive old contracts: At the latest after ten years, contracts with a fixed interest rate can be terminated and rescheduled. The higher the interest on the old contract and the longer it runs, the more it pays to cancel the loan and apply for a new loan with lower interest rates.

How does the reposting of a loan work?

Old, expensive loans can be reposted under certain circumstances. However, it must be checked in advance whether the replacement of the old loan really worth it, if the effective interest rate of the new loan in connection with the desired duration thus actually leads to lower overall costs. In addition, a prepayment penalty must be paid to the former bank in the worst case. Although consumer advocates in the past have repeatedly asked for a cap on this fine for loans. However, there is currently no such legal regulation. Rather, the amount of the compensation is regulated by contract with the bank in the respective loan agreement. On the other hand, it is no problem to terminate and repatriate a loan agreement that is at least ten years old, because then the penalty fee will be waived.

Credit Processing Fees: Recovery of some legacy contracts

Anyone who is, in any case, applying for a new loan and reposting the old loan, should also check whether loan processing fees were charged to the old contract. Because now there are clear judgments to these processing fees: Since it is any way in the business interests of the bank to forgive the credit, it may not calculate any loan processing fees, but only charge interest. For years, however, the processing fees were an integral part of many contracts.

In an interview with, attorney Philipp Caba has explained how affected credit customers can react and recover unlawfully levied processing fees. However, many claims are already barred. However, as some banks have illegally charged fees even after 2012, a recovery is useful here.

Cancellation instruction incorrect: Retrieve high interest by reversing

The loan processing fees for loan agreements are not the only issue that has been occupied by consumer advocates in recent times. For example, many revocation policies for real estate loans entered into after November 1, 2002, are flawed or inadmissible. Contracts in which this is the case can be revoked even after repayment of the loan. This means that customers not only receive prepayment penalties already paid back. You can also revoke and rewind current, expensive loans. In this case, the borrower will be reimbursed for all interest and principal payments already made if he repays the entire loan amount to the bank within 30 days. This is worth a debt restructuring on a cheap new loan agreement so especially.