In most cases, an installment loan is a bank loan that is provided for a fixed term, at a fixed interest rate, without collateral (for loans that private individuals grant to each other – for example, in a family circle – one also speaks of installment loans or so- called personal loans).
Some banks require the GFI letter as security for an installment loan, which was used, for example, to buy a car. However, installment loans are generally granted without collateral and for free use.
What can an installment loan be used for?
Installment loans can generally be taken out for free use and are not earmarked (such as mortgage lending). You can buy a new car with an installment loan (usually even cheaper than with the financing offer of the car dealer, because you can then act as a cash payer and negotiate corresponding discounts).
But also the purchase of new furniture, the modernization of your apartment or the rescheduling and consolidation of several existing installment loans (including overdraft compensation) into a cheaper installment loan are common reasons for taking out an installment loan.
Who can get an installment loan?
As with any loan, banks also check personal creditworthiness and creditworthiness for an installment loan (if loans have been properly repaid in the past, this is a positive feature that can be seen in the financial standing information).
Personal creditworthiness refers to the ability to raise the regular repayment of the installment loan and the interest payments from your own income (taking into account existing payment obligations).
Who does n’t get an installment loan?
It becomes more difficult for a borrower if he can not prove that he has sufficient income of his own, because this is a prerequisite for the approval of an installment loan.
Schoolchildren, students, trainees and the unemployed do not receive conventional installment loans because they generally do not have a sizable income.
Even those who have received a negative financial standing entry in the past due to irregular loan payments or arrears, also find it difficult to get a conventional installment loan from a bank. However, there are providers that specialize in such credit solutions.
Those who already have a negative financial standing entry can use our cooperation partner Good Finance. Here, many with a negative financial standing entry still get loans on acceptable terms – without financial standing.
Is there also installment credit for the self-employed?
Clearly: yes! There are also installment loans for the self-employed. Only the credit check is a bit more complex. The last two financial statements, income tax assessments and bank statements from the last four to five weeks are required.
If the creditworthiness is sufficient, there are banks that also provide installment loans to self-employed borrowers. We have such banks in our online comparison.
What security is required for an installment loan?
As a rule, banks do not require additional collateral for installment loans, as described above (a salary assignment is included in the loan agreements as standard). At most, with a car loan, individual institutes still require the GFI letter to be sent today. However, many banks are now doing without it.
How long is the term of an installment loan?
Usual short-term terms for installment loans are 12 to 48 months. However, most installment loans are extended with a longer term of 72, 84 to 96 months due to the associated lower rate.
But there are also long-term installment loans with a term of 120, 144 or 180 months. But only a few banks provide such long-term loans, which limits the choice of possible banking partners.
The most extensive comparison options for installment loans exist with a term of 72, 84 or 96 months. Almost all banks cover this maturity range and therefore there are most offers.
Click here for a free online loan comparison.
What is the interest rate for a cheap installment loan?
The conditions for cheap installment loans depend on the creditworthiness of most banks and are calculated according to the amount of income and existing payment obligations. Nevertheless, many installment loan terms in the range of 3.70% to 8.90% can be described as favorable.
Those who present a higher default risk for the bank as a borrower will only receive offers with appropriate interest premiums, which can still be better than not receiving an installment loan at all.
However, some regional branches also offer their customers significantly higher interest rates of up to 13 and 15 percent. So it is worth comparing here before closing.
Where can I get a cheap installment loan?
Online comparisons provide the quickest overview of cheap installment loans. With our free installment loan online comparison, you can compare the conditions of up to ten banks directly and apply for your loan directly. We then switch on and check your request. Incidentally, you will not incur any costs even if a loan request should be rejected in individual cases.
You can start the free installment loan online comparison directly here and have all options for a cheap installment loan checked risk-free by entering your data.