Loan Repayment – Choose the Right Type!
The most uncomfortable part of a loan is without a doubt the loan repayment. The terms of a financing are determined by the type of loan. In addition to the loan amount, term and interest rate, the modalities of repayment are the most important criteria. However, as a prerequisite for a loan repayment, your request for a loan must first be approved. This is often very difficult, especially if you already have a credit bureau entry. Most banks regard this as a loss of creditworthiness and deny you the desired loan. However, we do not collect credit bureau information and offer you up to 20 offers from which you can choose the right loan.
How does a loan repayment work?
In principle, a loan is repaid using an agreed interest rate and a fixed duration. Both the amount of interest and the number of agreed installments fluctuate depending on the contract that is concluded between you as the borrower and the lender. A distinction is generally made between the following types of credit, each of which defines different terms of loan repayment:
- redeemable loan
- Final loan
- balloon loan
Each type of loan has its advantages and disadvantages, which you have to weigh up on the one hand according to your financial possibilities and on the other hand also depend on the purpose of your loan. Incidentally, while you have to provide this to most banks in order to get your loan approved, the purpose is not relevant for us. All you have to do is fill out your loan application, which we will process immediately. And after a short time, you can use the offers we send you to make a qualified comparison between the offers and the individual loan types. Where many banks take months to review your application, we do an immediate review.
This form of credit is based on an installment loan, which means that you repay your loan in several installments. The peculiarity of an annuity loan is, however, that the amount of the installments does not change over the entire term. Your loan repayment is therefore very easy to plan and includes the interest portion as well as the repayment portion. So you always pay the same amount up to the last installment until the loan repayment is completed.
The repayment loan is also called an installment loan. Unlike the annuity loan, the repayment rate is gradually reduced here. This is due to the fact that the repayment component remains constant over the entire term, but of course the interest component decreases as the residual loan amount decreases. This means that the installment you have to pay will continue to decrease until the remaining loan amount corresponds to the repayment component and the loan repayment is completed with the last installment.
Another form of loan repayment is the so-called final loan. The conditions here stipulate that you make the interest payments on the loan, meaning that you do not have to spend any repayments up to the last installment. The advantage of this type of loan repayment is that you have to pay very low installments over the duration of the loan. The disadvantage, however, is that the residual loan amount does not decrease. With the payment of the last installment, the total loan amount is due. As a rule, a final loan is only taken out if you can foresee that your finances will have a balance at the end of the term that covers the entire loan amount. The upcoming payment of life insurance, building society contracts or other savings investments is often used to repay such loans. Another option is to reschedule your loan. This enables you to replace the existing loan with a new one, which of course also entails new conditions and a further loan repayment.
An intermediate form of the final loan and the repayment loan is the so-called balloon loan. This consumer loan regulates the loan repayment in such a way that you only have to pay very low installments at the beginning of the term, but they increase with the passage of time. Depending on the agreed rules, this can mean that the last installment does not represent the total loan amount as in the case of a final loan, but is nevertheless comparatively high. Some case studies show that if you choose a balloon loan, up to half of the loan amount may be due for the last loan installment.
Determine the terms of your loan repayment
With a loan arranged through us you can determine how your loan repayment works. Simply fill out a loan application and we will send you up to 20 offers. When you make a comparison, you can then determine which conditions best suit your personal wishes and requirements. In addition to the effective annual interest rate, the term is particularly important here.
If you get your money back sooner than you thought, early loan repayment can also be a good solution. Some lenders require prepayment penalty for the remaining term, but since June 2010, this may only be a maximum of one percent of the remaining debt. Here it is important for you to weigh up whether the prepayment penalty exceeds the amount still to be paid or whether an early loan repayment might make sense for you. Special repayments can also be a solution to shorten the term of your loan.
The type of loan depends on the purpose. While almost any type of loan is suitable for a car loan, a mortgage is not advisable for a real estate loan, for example. You can use the loan application to tell us what you want and thus determine which form of credit suits you.