Cologne A new car, expensive furniture or a kitchen renovation – such expenses can be financed in stages with an installment loan. And in times of rising prices, it may well be worth it. “Rising inflation in particular is tempting many people to make even larger purchases now before they get even more expensive. On the other hand, Corona has caused a certain catch-up effect, which also increases the demand for installment loans,” says Max Herbst from FMH-Finanzberatung.
Herbst compared offers from different providers and found that not only the interest rates, but also the other conditions sometimes differ significantly – which leads to corresponding price differences. It helps if a prospect knows what to look out for in order to identify the most favorable conditions for him.
FMH-Finanzberatung evaluated 24 installment loans with a term of 24 to 84 months in terms of lead time, interest, possible suspension of the installment, special repayments and early repayments. Overall, the overall result was positive: Every third installment loan was given the top rating of “very good” thanks to high flexibility and fair contractual conditions.
Ikano Bank offers the most flexible offer. The installment loan comes without lead times, special repayments and early repayment are possible free of charge. In addition, customers can suspend the rate three times a year for a maximum of two months.
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However, all of this has its price: the determined effective interest rate is 4.74 percent, higher than for the majority of the products. In this regard, the offer ranks third among the most expensive lending rates.
Incidentally, the most expensive installment loan comes from Postbank, where FMH determined a value of 6.42 percent. The installment loan from the Ostsächsische Sparkasse Dresden follows at some distance and has an average effective interest rate of 6.04 percent.
Cooperative banks with the lowest interest rates
The installment loan from PSD Bank West offers the lowest interest rate of all evaluated offers at 2.49 percent. Attention: The conditions for a specific installment loan depend on the amount paid out and the respective term.
The mean effective interest rate shown in the table above all offers a guide to comparing offers with the same term. In contrast to the debit interest, the amount of which is derived solely from the general interest rate level of the ECB, the effective annual interest rate includes all costs and fees associated with a loan.
Overall, the FMH evaluation contains four installment loan offers from branches of the PSD Bank: including the most inflexible, which comes from the PSD Bank Hanover. The effective interest rate is in the middle at 3.29 percent. However, it is not possible to suspend the installment, nor are free special repayments or free early repayment. This can make the loan more expensive.
In the FMH evaluation, the offer is therefore the only one that receives the rating “less good” – the worst of all. FMH Finanzberatung has classified nine other offers in the level above as “okay”.
The longest possible runtimes can make sense
As a rule, it is advisable for customers to choose the longest possible terms, “because then the rate is lower and you don’t get into payment difficulties so quickly,” advises expert Max Herbst. Meysham Ashori-Fard, a specialist in installment loans at Dr. Klein in Hamburg: “It should also always be checked whether existing installment loans can be rescheduled and combined with new loans. In this way, the overall costs can be significantly reduced in some cases.”
The financial experts assume that interest rates for installment loans will rise in the coming months. On the one hand, this is the result of rising inflation, which is now higher than all interest rates in the comparison field.
On the other hand, it is foreseeable that the ECB will soon raise interest rates and reduce bond purchases. “This means normal interest rates for call money and time deposits again and thus also interest rate increases for installment loans,” says Herbst.
At the same time, the refinancing conditions for the banks are becoming more expensive. “Recently, the real interest rate – i.e. the interest rate minus the inflation rate – has been negative. This will soon return to normal,” Ashori-Fard is convinced.
Slightly more restrictive lending is also conceivable. However, Herbst does not see a slump in the installment loan business for the time being.
The war in Ukraine is apparently also having an impact in this area. On the one hand, he stirs up fears about the future in many people. On the other hand, the topic of energy supply is becoming more of a focus for a number of people – which arouses a certain desire to invest: “We are finding that the war is leading to increased interest in photovoltaic systems and energy-related renovations,” says Ashori-Fard. Many people wanted to make themselves independent of gas and oil prices and invested in alternative energy production.
With such a project, it could also make sense to think about a earmarked installment loan, as this is usually associated with lower interest rates. But that would require another comparison.
More: Interest rates are rising unexpectedly quickly – experts advise buyers.