As a rule, lenders intend to make a profit. One way to make a profit is to lend money and not only claim back these sums of money but also loan interest. In Germany there are some regulations as well as donors can set their own conditions for the loans.
You can therefore largely decide yourself on the amount of the loan interest. Due to the high level of competitive pressure, there are no major differences in interest rates.
The loan interest is always adjusted to the default risk
However, the loan interest is always adjusted to the default risk of the credit form or credit class. The lenders categorize credit customers based on their personal situation into risk groups in order to either not grant a loan, a loan with a limited amount or a loan with adjusted loan interest rates.
If a loan is no longer repaid, the lender is still entitled to the money due to the legal situation and his own credit conditions. As a rule, the loan interest on burst loans is adjusted to around 18%.
If the borrower cannot meet these demands directly, the loan amount doubles every four years without repayment. This enables lenders to get a lot from borrowers who can get something to offset the losses from other borrowers. It also speeds up borrowers’ bankruptcies.
If the loan interest rate on a broken loan remained at around 6%, it could take decades for the lender to have the basis to forcibly sell the borrower’s assets. It often takes less than ten years before the lender can at least partially satisfy his claims.
Valuation basis for interest on loans:
- Current income
- Collateral with a permanent fair value
- Fixed calculable income
- Business figures that indicate stable income
High jumps in loan interest rates
The first article describes that the jumps in expected loan interest are not serious. However, they are real. If a loan of 4, 6 or 8% can be taken out here, the loan costs are significantly higher, especially with long terms, even with these optically small-looking jumps. The loan costs for a loan of 8 instead of 4% would be more than twice as high.
The difference is very slight for the same term with a correspondingly higher rate. If the term is extended at the same rate, the costs increase noticeably. However, since most borrowers cannot cope with a higher rate, a higher interest rate on the loan also means a long term of the loan, which means that borrowing costs increase disproportionately.
Therefore, the borrower should not use the first best offer, he should look at which reputable lenders offer really favorable conditions. In some cases, individual offers are created, which must therefore first be asked for. The borrower should explain to the lender that Schufa information must be provided in such a way that it is not recorded in Schufa. Otherwise, the creditworthiness can decrease with many credit questions.
Rewrite loan interest
Most long-term loans are granted at a guaranteed interest rate for a limited period of 7 years, for example, in order to then renegotiate the loan interest rate.
When interest rates fluctuate, lenders cannot calculate for 30 years, which is often used for construction loans. The borrower should take into account that they will have to pay higher interest on the loan after these renegotiations.