Car broken and account empty? Then an installment loan can help you out of a tight spot in the short term. But when looking for the right consumer loan, there are a few things to consider. Find out how to find cheap small loans and what to look out for in the loan agreement here - these are the best tips and tricks. But first, we'll give you an overview of the best and cheapest installment loans.

HOW DOES AN INSTALLMENT LOAN WORK?

On your way to work, thick smoke suddenly billows out of the engine compartment of your car - you have engine damage, your car is beyond repair. That's just what you need, having just plundered your savings for the family vacation … Still, you have no choice: you need a new car as soon as possible to get to work and take the kids to school. What now?

In such a situation, an installment loan can help you out of a tight spot. With this special type of loan, also known as a consumer loan or acquisition loan, you receive a pre-determined sum paid out in full by the bank. You pay this back in precisely timed installments. Find out where you can take out an installment loan, what you should look out for and which provider has the best conditions for your installment loan.

If you apply for an installment loan and it is approved, the lender usually pays you the full amount at once. The general conditions for consumer loans are fixed in advance and are unchangeable. You must repay the entire amount disbursed at fixed intervals and amounts and within an agreed term. Normally, monthly installment payments are agreed for the repayment of installment loans. These relatively rigid framework conditions distinguish the installment loan from an overdraft facility, for example.

In addition, the interest rate at which interest is paid on the money made available to you is fixed before the loan is disbursed. The lower the monthly installments, the longer the term of a loan. However, the longer the term of your contract, the longer you will have to pay interest on the money provided. The interest you have to pay on the amount of money you have borrowed is, in a sense, money given away to the bank. You yourself get nothing for this money, i.e. no monetary object whatsoever - so that the lenders don't take advantage of your emergency situation as well, you should take our tips and tricks for installment loans to heart.

In the case of the APR, credit institutions also distinguish between a creditworthiness-independent interest rate and a creditworthiness-dependent interest rate. A provider's creditworthiness-independent interest rates are the same for all borrowers, so a provider does not differentiate between one customer and another when it comes to creditworthiness-independent interest rates.

Important: Creditworthiness-independent interest does not equal creditworthiness-independent credit.

Creditworthiness-dependent interest, on the other hand, is based on the customer's creditworthiness. For example, someone with a higher income and a permanent employment contract will be offered a lower interest rate by the bank than someone in a temporary employment relationship.

Caution: banks like to lure customers with creditworthiness-dependent interest rates, because the advertised interest rates are significantly lower than for loans with interest rates that are not dependent on creditworthiness. For people who are classified by the bank as particularly creditworthy, a loan with creditworthiness-dependent interest is often very worthwhile. However, very few borrowers actually receive the advertised interest rate. As a rule, the better your credit rating (according to the bank), the more favorable the interest rate offered.

CREDITWORTHINESS IN CONSUMER CREDIT

Not everyone who wants a loan in the USA gets it. The decisive factor is creditworthiness. This is the term used by lenders to describe the borrower's ability to repay a loan under the agreed terms. This ability is usually measured in terms of personal and professional situation, i.e. assets and income.

Do you have a temporary or permanent employment contract? How high is your income? What financial burdens do you already have to bear? Answers to these and other questions will determine whether you get a loan and what the terms of the installment loan will be. Against this backdrop, young professionals with fixed-term employment contracts have worse chances of obtaining a loan than civil servants in the public sector or salaried employees in permanent employment. Self-employed people have a particularly hard time obtaining an installment loan, because very few institutions offer consumer loans for you.

Each bank decides whether you are creditworthy and eligible according to its own guidelines. An important indicator of your creditworthiness is actually always a positive credit score report). credit score stores, for example, information about credit or leasing contracts, current account openings and existing credit cards. Anyone planning to apply for a loan should therefore apply for their credit score credit report in advance. According to §34 of the Federal Data Protection Act, this can be done once a year free of charge, for example online or offline via a credit score application form.

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