In the credit negotiations your head buzzes? Do not be pressured and go through our tips before you graduate!
What can I afford monthly?
First, you should think about what credit you can afford monthly. It should not be too tight, in order to have more money for unforeseen expenses. Also possible income losses should be considered. With variable interest rates, it should be noted that as interest rates rise, so too will monthly mortgage credit burdens. There should also be sufficient financial cushion for this.
Get several offers
Get multiple offers to compare. It is important that you compare the effective interest rate and the total amount to be paid (previously “total burden”). The effective annual interest rate also takes into account the fees and expenses of the bank. Attention: Some institutions charge fees at the nominal interest rate, which are calculated per month. Do not take the first loan offer. Read the contract carefully – even the fine print.
Compare one-off costs
Compare also the incurred one-time costs (processing fee, collection charges) – these can make the credit much more expensive.
Negotiate Interest Rate & Margin
Be sure to negotiate the amount of interest on the loan and talk in particular about the amount of margin (margin) on which the bank earns and which is added to the refinancing costs (examples include EURIBOR, secondary market yield or euro interest rate swap). Refinancing costs are those costs that the bank spends on “buying in” needed money.
The better your credit rating (credit rating), the cheaper should be interest rate and processing fees.
Benefit from low interest rates
Low interest rates can be used for fixed rate agreements. Attention: The longer the fixed interest phase, the higher the difference to the variable interest. Fixed interest rates are often only available in the mortgage lending sector; Running times 1 – 10 years.
What should be considered for fixed interest rates?
A fixed rate agreement can be made either for the life of the loan or for a limited period of time. If the fixed interest period is shorter than the repayment term, you should agree on the interest adjustment clause and the margin (= margin) at the time of conclusion of the contract. In addition, we recommend that you observe the following points for fixed-interest agreements:
- Banks pay interest on fixed rate loans usually higher than variable rate loans:
- The longer the fixed interest period lasts, the more banks demand for the interest rate guarantee.
- When concluding a Fixed Income Agreement, remember that early redemption during the Fixed Income period may involve charges (prepayment penalty).
Compare required securities
Compare the required collateral. It is common practice to take out insurance (loan residual debt insurance, life insurance), but there are also big differences in premiums here. Compare therefore also offers of other insurance institutes. Possibly the bank can be offered an existing insurance contract. Important: If the conclusion of such insurance coverage for the granting of the loan is a condition, the consideration of the premium (s) in the effective interest rate is absolutely necessary.
Some banks offer their customers very comprehensive insurance packages – including disability, unemployment, illness and death benefit. Complaints in the AK consultation show that these often very expensive packages were not sufficiently explained or even simply “sold out”.
Insist on standard information and amortization schedule
Banks have extensive pre-contractual information requirements contained in the form “European Standard Information for Loans under the Consumer Credit Law”. Insist on the completion of this form and on a repayment plan.
What about special repayments or late payments?
Also explain the conditions for special repayments, early repayments, contract amendments, and the consequences of defaulting on installment payments.
Right of withdrawal
Within 14 days can be resigned from an already concluded credit agreement. However, this does not apply to mortgage loans.
Take care of credit intermediaries
The personal loan broker may charge a maximum of five percent of the contractually agreed loan amount (without interest) for the brokerage. Other additional charges for copies or processing fees may not be demanded by the broker.