Not only the loan amount, the personal creditworthiness and the choice of the loan provider influence the interest rate, but also the term of the loan. If you are not sure which loan offer you take out with an optimal term, we have put together all the relevant information for you.
Our guide also offers you a look behind the scenes, you will be surprised. The unsuitable term can have much broader consequences than just the noticeable impact on the interest rate.
Loan maturity – don’t just look at interest rates
The first glance at the interest comparison in the loan comparison calculator shows that short-term loans are cheaper than long-term financing. The term of a loan often has – even with the same loan provider – greater interest effects than the amount of the loan. In conclusion, it is only human to finance as short as possible so that the overall financing costs are as low as possible.
The interest comparison calculator makes it easy to discover the best interest rate term for installment loans. The term is used to “play” with the term until the effective interest of an interesting offer is at the bottom. Now a quick comparison with other banks as to whether there is a particularly favorable interest rate hidden behind a certain term.
In addition, nobody likes to postpone a loan for a long time. The motto, “It will be tough, but then I will quickly get away from it” is very common. Of course, nothing can go wrong with a “sewn on edge” financing. The bank is happy to offer RSV (residual debt insurance) against unemployment or illness. It is well insured for brisk debt repayment.
It would be advisable not to concentrate solely on the comparison of interest rates and to leave the security to an RSV. A look at the calculator proves that saving interest on a short term does not make up for the costs of the RSV. The small interest gain does not pay off, compared to about 20 percent of the loan amount as an insurance contribution, not guaranteed!
Term loan for installment loans – take out long-term and pay back quickly
The likelihood that a borrower dies prematurely up to middle age is extremely low. Repayment ability in the event of illness or unemployment can also control the duration of loans. Instead of horrendous insurance costs, the interest burden increases to a comparatively modest extent. However, the rates will be noticeably lower if the proper safety reserve is saddled up for the minimum term. The loan remains affordable, even if unemployment and illness reduce income.
Nevertheless, nobody wants to pay off their debts for a long time. The loan repayment, despite a generous term, can be made just as quickly as with a “sewn on edge” financing. There are only two things to consider. A look at the loan terms shows whether the lender grants the right to free special payments of any amount. If he doesn’t, the competition looks forward to you as a solvent borrower.
The second point is more difficult to do. Borrowers can reduce the actual term at will by special repayment, provided they save their credit. The easiest way to do this is to place a standing order on a savings book. Borrowers then pay the difference to the maximum portable installment amount monthly in a savings book. The bottom line is that the waiver of the RSV is worth it in two ways.
Smartly measured maturity – guarantee of your secure solvency
By optionally extending the term of the loan, the borrower saves the insurance premium and retains additional financial scope due to the savings. Problems that are not insured by RSV, for example, would be an unscheduled car repair or an unexpected additional loan requirement. If repayments are made with binding high rates, it is difficult to adequately respond to additional money requirements.
Borrowers who only pay back small installments retain their financial scope. The car repair is exceptionally paid for by the savings book, the existing credit obligation is still serviced in accordance with the contract. It just takes a little longer for the loan to pay off. The chance of being able to pay an additional installment loan safely speaks even more clearly for a suitable long loan term.
When it comes to lending, every credit institution calculates very precisely that the household bill proves a secure repayment. Of course, the existing loan rate is included in the calculation. With average income and high installments, it is not certain whether a second loan can be approved. Once the term has been chosen carelessly, borrowers will only find what they are looking for when they need additional financing.
Loan term – the most important thing for fast readers
Borrowers can finance optimally if they do not only pay attention to the term with the cheapest effective interest rate. Loan offers with a relatively short term are particularly cheap in the loan comparison calculator. The most expensive mistake would be to tie the financing on edge with a view to the low interest rate. The high rates once agreed do not change.
An additionally concluded RSV protects against the real risk of unemployment and illness, but makes the financing massively more expensive. The lesser financial evil would be to measure the term of loans in such a way that payment in installments remains sustainable in “bad times”. Nevertheless, every borrower is still free to repay quickly.
Instead of a bindingly agreed high repayment rate, the borrower voluntarily makes regular special payments. If unexpected costs require additional money, the long term of the loan pays off twice. Smaller money worries will solve themselves if special payments are waived for a while. If there is a greater need for financing, the path to regular extra credit remains unobstructed due to the cleverly chosen term for loans.