Making the extensive and often confusing range of loans on the market more transparent for consumers is one of the backgrounds of the consumer credit directive. The often tempting interest offers – usually marked with an asterisk or the word “Ab” – only apply to optimal, mostly unrealistic starting situations, and from a bank perspective.
Credit-dependent or fixed interest rate?
Interest margins are therefore often offered so that a binding loan offer can only be made based on the credit check. The bank collects information from credit bureaus, such as Credit bureau, and uses the score listed there to determine the loan terms to be offered.
This score is calculated on the basis of the information entered, which starts with general information, such as the frequency of moving house, and goes up to special information, such as the number of bank accounts, credit cards, payment behavior, etc. Incorrect data can also be processed, which is why you should use the free information, which can be drawn once a year, for checking. If the creditworthiness from the bank’s point of view is not perfect, the alternative loan to fixed interest rates is an option.
Why is the fixed rate higher?
The fixed interest rate offers for loans are naturally higher than the cheapest credit-dependent ones, but still lower than the upper limit of the offered interest rate spreads, because the credit default risk is distributed to all borrowers. These fixed-rate offers mostly relate to consumer loans that deal with loan amounts between 2,000 and 75,000 USD and a term between 12 and 120 months.
It is advantageous for the consumer that, due to the fixed interest rate, the offer must not deviate from the loan agreement and the costs can therefore be calculated. It is important, however, that the effective annual interest rate is the measure of all things, because it includes fees and costs for payment in installments, etc. It may well happen that different banks offer the same nominal interest rate, but differ in the effective one.
Compare offers exactly
Exact research is therefore also necessary for a fixed-interest loan. According to the consumer credit guideline, all costs relevant to the loan must be listed in the offer and the effective annual interest rate must be correctly calculated. If this differs from the offer, a claim for damages arises. It is therefore not surprising that the number of fixed interest offers has increased again, because on the one hand the processing effort is not so high and on the other hand the consumer protection requirements are easier to fulfill.
With a fixed-rate loan, the interest rate may be a little higher, but it is predictable. The comparison effort is lower in any case, because in the case of offers dependent on creditworthiness, binding offers must first be obtained according to one’s own creditworthiness and then compared.