How to lower your credit costs – our 9 tips
They plan to take out a loan? For example to finance a car? You are not alone with this in Germany. In fact, over 8 million loans were taken out in Germany in 2017 alone. These are needed for different purposes. The most common ones are:
- a debt rescheduling or the redemption of an expensive overdraft facility
- the purchase of a car
- The purchase of furniture, such as a kitchen
- necessary renovation or modernization work on one's own house or apartment
- the acquisition of technical equipment
However, each credit also causes costs. Starting, of course, from the necessary repayment, since a loan must, after all, be gradually repaid to the lender, to the interest that is due for lending. How to keep your credit costs as low as possible, we have summarized once here.
9 tips on how you can keep your credit costs as low as possible at a glance
- check whether the loan you want to take out really makes sense
- make a comparison of the providers
- check whether you really need a residual debt insurance (RSV)
- Choose the loan term wisely
- Pay attention to your creditworthiness
- avoid the overdraft facility
- you use the possibility of unscheduled repayment
- Check with some regularity the possibility of a debt rescheduling
- Keep your loan amount as low as possible
Check whether the loan you want to take out is really reasonable
you want to buy a new car or you need a new vehicle, because your old car unfortunately refuses to serve you? Then, of course, in many cases you will need a loan, because few consumers can afford to buy a suitable vehicle without taking out a loan. Necessary modernizations, renovations or conversions are also usually associated with taking out a loan.
Whether a loan is really worth it, however, you should ask yourself above all when it comes to "treating yourself to something" for once. The new notebook on installment payment, the new cell phone or the dream vacation on credit – these are purchases that can significantly reduce your financial performance for years by taking out a loan. The question is always, how high the benefit is in comparison to the effort or just to the costs.
Check carefully whether the reason for which you want to take out a personal loan really justifies tying up your financial resources for years on end.
Credit expert tip: Consider whether the benefit you derive from a loan lasts at least as long as the repayment of the loan lasts. The lifelong dream of a trip around the world can be a reason for a loan, as can the purchase of a very special appliance. This ultimately depends on how important the reason for the possible borrowing is to you.
Make a provider comparison
Many car dealers offer you directly the car financing with. Also your house bank comes gladly again and again with a new credit offer around the corner. But if you want to make sure that you really get the best conditions, you should in any case make a comprehensive loan comparison. The best way to do this is to use a comparison calculator on the Internet, such as the one you can find here.
In addition to the loan amount and the planned term, you can also specify the planned use and thus select the appropriate loan offers for your needs. In the offers you receive, you should pay particular attention to whether the loan offer is creditworthiness-linked and whether the effective interest rate is stated directly. In the case of creditworthiness-dependent offers, you need a concrete offer that is tailored to your financial situation.
Check whether you really need a residual debt insurance
Residual debt insurance can make sense – but it is definitely a costly affair. Residual debt insurance is particularly important when
are. In these cases, a residual debt insurance can make a lot of sense. For short loans with a comparatively low loan amount, you can save a lot by waiving a residual debt insurance.
Credit expert tip: A risk life insurance in the sum of the credit for the duration of the credit locked can be sometimes clearly more favorable, than an appropriate remainder debt insurance.
Choose the loan term wisely
the loan term is usually determined by you as the borrower. The term of the loan is a decisive factor in the question of the installment amount. Often the interest rate is also dependent on the term of the loan. Before taking out an online loan, check what amount you can afford to pay each month and the maximum period over which you would like to repay your installment loan.
You should not set the monthly installment too low – for example, by using an unnecessarily long term – as this can greatly increase the total cost of the loan due to higher interest rates and a longer interest payment. However, your rate should not be set so high that you no longer have any financial leeway.
Pay attention to your credit rating
Long before taking out a loan, you can do various things that, on balance, can earn you a more favorable interest rate in the event that you need to take out a loan. The most important thing is to pay attention to your credit rating. For this purpose, you should regularly obtain a self-disclosure from the Schufa.
Check whether outdated or incorrect entries can be deleted. In addition, you can see on the basis of the existing entries what you can do to improve the assessment of your creditworthiness even further. This may include, for example:
- Avoid setting up multiple checking accounts
- do not use more than one, maximum two credit cards
- avoid taking out store cards with a granted credit line – this is often reported to Schufa as ongoing credit, even if you have never used up the credit line
- Always meet your payment obligations on time
Since most loans come in the interest rate structure dependent on creditworthiness, you can often achieve a significant reduction in credit costs by this point alone, if you then need a loan in the future once.
Avoid the Dispo credit
The interest rates for an overdraft facility are significantly higher than those of a small loan, even in times of absolute interest rate lows. Interest rates of 12% and more are not uncommon. Therefore, if you are planning to make a purchase, you should definitely not pay for it from your overdraft facility, but rather apply for an appropriate small loan. You can find a wide selection of providers here in our credit comparison.
Use the possibility of unscheduled repayment
You only ever pay interest on the loan amount that is still to be repaid by you after the final repayment. You can significantly reduce the total cost of credit, if you make unscheduled repayments with some regularity. Even if it's only amounts as small as one or two monthly payments, these can end up significantly reducing the loan term and thus the total loan costs incurred. You can find detailed information here.
Loan expert tip: If you plan to make unscheduled repayments, you should already take this into account when choosing a lender. Not all banks and credit institutions offer this possibility.
Check with some regularity the possibility of debt rescheduling
You have taken out a loan with a comparatively long term? Then, with some regularity, but especially if something has changed in your circumstances, you should consider the possibility of debt restructuring. Check with the help of our loan comparison whether you can find more favorable offers. If so, you should not be afraid to take the step of debt restructuring. Read more about sensible debt restructuring here.
Keep your loan amount as low as possible
The temptation is there – for example, you need to borrow a sum of 5,000 euros for a debt restructuring or to pay off your overdraft facility.000 euros. But the loan offer is so favorable – why then not directly 6.000 or 7.000 euros and still make one or the other purchase?
Basically, the higher the loan amount, the higher the cost of the loan. For this reason, you should always keep the loan amount as low as possible.