The installment loan as a financing option for private individuals.

With the term installment loan,

With the term installment loan,

Financial experts refer to the lending of money by a lender, which the borrower repays over a predetermined period with regular, consistently high partial payments (installments). for more.

Interest is payable for the granting of an installment loan, which the borrower has to pay to the lender in addition to the loan amount. An installment loan is granted either as a consumer loan to private individuals or as an investment loan to companies. § 498 BGB (Civil Code) serves as the legal basis.

Bank, it is important for him that he can compare the conditions for different installment loans.

  • Use our loan calculator or interest calculator free of charge to quickly and easily calculate the approximate total or interest costs.

When comparing installment loans, you should pay particular attention to certain factors, because they ultimately decide how expensive or cheap an installment loan is. The key factors include:

  • the borrowing rate (it indicates the costs based on the loan amount)
  • the annual percentage rate (it contains additional costs of the loan)

Find out credit using a credit calculator available online.

Find out credit using a credit calculator available online.

You can get a result by entering the following data into the loan calculator:

  • Loan amount
  • Duration in months)
  • Effective interest rate
  • Frequency of installments (usually monthly)
  • Cost factors (ancillary credit costs)

Sometimes you are asked about the amount of equity and you have to indicate whether you want to make special repayments. The amount of these special payments per year must then be stated.

  • Assuming a borrower needs $ 100,000, which he would like to repay in monthly installments with an effective interest rate of 4% within 72 months. There are additional costs of $ 5,000 and special repayments are not planned. If you enter this data in the calculator, the result is that you have to pay a monthly rate of $ 1,483.16, the borrowing rate is 2.19% and the interest payable is a total of $ 6,787.60 amount to. If you add the additional fees, the total cost of the installment loan amounts to $ 111,787.60, so you have to pay $ 11,787.60 to borrow $ 100,000 from the bank.

The banks always charge prepayment penalties if the borrower wants to repay the loan before the actual end of the term. Early repayment usually occurs when the borrower unexpectedly gets money, for example through inheritance, lottery win or the like.

Bank calculated interest

Bank calculated interest

The reason for the compensation then requested is that the bank calculated the interest on the installment loan in advance for the entire term. In addition, the borrower gains an advantage because the interest rate remains at the agreed level during the fixed rate period, even if the interest rate level in the market actually increases. If the borrower repays the money in advance, the bank will lose interest income. To compensate for this, she therefore raises the prepayment penalty.

  • You can avoid the prepayment penalty as a borrower by terminating the loan after 10 years with the notice period, for example, to have it replaced by another bank. The other option is to cancel the installment loan due to incorrect cancellation instructions.

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