The installment loan with fixed interest is a loan with which the interest is fixed throughout the term. Fixed interest rates are standard for today’s consumer loans. The interest rate is given in percent. Criticism at http://www.salon-oliwia.com/fast-installment-loans-online-online-real-installment-loans-1000/
The annual percentage rate is the size that makes installment loans from different providers comparable. In addition to the interest that must be paid on the borrowed money, the effective interest rate also includes other fees, such as the processing fees that can be charged by the banks for a loan. The lower the percentage, the cheaper the loan is for the customer.
Installment loan with fixed interest in terms of creditworthiness
However, for many consumers, installment loans, where interest is not dependent on creditworthiness, are called fixed-rate installment loans. It would be correct to have credit with interest independent of creditworthiness, because there are fixed interest rates for both loan options over the entire term.
Comparison of credit-dependent and credit-independent interest
The installment loan with fixed interest – i.e. with interest independent of creditworthiness – has the advantage for borrowers that they can immediately see how high the interest rate that the bank will charge for the loan. Banks that offer the fixed-rate installment loan link the amount of the interest rate, if any, to the amount of the loan amount and the desired loan term. As a loan seeker, you can calculate in advance what the costs of the loan are.
However, the situation is very different for loan offers with interest rates dependent on creditworthiness. The banks advertise here with a low interest rate, which in reality, however, only very few borrowers are granted. The actual annual percentage rate is determined individually based on the creditworthiness of each individual borrower.
If you want to apply for an installment loan with interest rates dependent on creditworthiness, you should always get a personal loan offer in advance, because only then will you find out how high the interest will really be. When comparing loans, consumers find a bit of an orientation on the actual level of interest when they look at the representative example that banks have had to publish in parallel with the low interest rates advertised since the introduction of the new consumer credit directive in June 2010. The interest rate that two thirds of all borrowers have to pay is then specified here.
Always make a loan comparison
If a credit comparison is now made, this difference must be taken into account, because otherwise you compare completely different offers that are actually not comparable and ultimately work with incorrect information that leads to the wrong decision.
The installment loan with fixed interest in the sense of interest independent of creditworthiness always does not look so cheap in the credit comparison at first glance. For this reason, the loan offers of banks that work with fixed interest offers do not appear in the top places in the credit comparison.
But an installment loan with a fixed interest rate of 7.90 percent can be cheaper than the loan offer of another bank that advertises with low interest rates depending on the credit rating, but where the loan ultimately costs the customer 8.90 percent. It is only through a qualified comparison of the different offers that it is possible to get a precise overview. For borrowers with a rather average credit rating, an installment loan with fixed interest rates is usually cheaper than an installment loan with interest rates dependent on creditworthiness, because the personal interest rate will then often be above average.
Why are these differences made at all?
Banks hedge their own risk through interest rates by assessing the risk of customers defaulting. Banks that offer fixed-rate installment loans spread the risk equally among all borrowers. The professor pays the same interest as the nurse. It is very different for loans with interest rates dependent on creditworthiness. The personal credit risk of the borrower counts for the amount of the interest rate, so that a professor can assume that he will get his loan on better terms than the nurse.