At any time, both private and business acquisitions may be necessary. Or the opportunity is cheap and you have the chance to get a bargain. However, the required liquidity is not always available, which is why financing is being considered. First, then the amount to be financed is calculated.

This depends crucially on the purchase price and the own funds that can be made available. There may also be actions by manufacturers of electronic devices, furniture, cars or motorcycles. When considering whether to finance a home or condominium, further criteria are added (development potential, need for restructuring, fixed interest rates, the location will become more attractive in the future).

Sometimes there is no specific object for a loan request, it just requires a financial headroom. Or it should be found for a pre-existing expensive loan a cheaper alternative.

As diverse as the reasons for a search for a loan can be, so extensive is the offer on the market. Now it is important to get an overview of which types of credit there are. Which loan is best suited for the individual requirements?

To shed some light on the credit jungle, various types of loans are highlighted below:

Company loans

Those who are employed often have the option of obtaining a loan from their employer. This is certainly the cheapest form of a loan. Employers use this tool for employee retention. As an employee, you have no problem as long as you have a harmonious employment relationship.

The moment a separation occurs, the employer loan is usually due. This leads to the urgent need to search for alternatives.

Cash advances (credit line, framework credit)

These are individually granted credit lines on the checking account, which can be used as required. Condition for the height is a regular monthly income. Cash advances are suitable for bridging short-term financial bottlenecks. Interest rates are generally higher than installment loans (between 7% and 14%).

Installment loan

The majority of loans in Germany are installment loans. A loan amount of up to 50,000 euros can be chosen. The loan is paid in monthly installments. Either the monthly maximum possible rate can be determined and from this the repayment period can be calculated. Or the repayment period is determined and from this the monthly rate is calculated.

The loan amount to be paid is calculated from the loan amount plus the agreed interest. Note the effective annual interest rate, which takes into account the compound interest effect (the nominal annual interest rate is the annual amount that the bank will charge for lending). At the end of each year, however, the existing remaining balance is reinvested.

Conventionally, installment loans were granted by banks. There are now many other lenders, such as automakers, dealers, individuals.

Special features of the car financing

When buying a car, there are alternative financing options to the installment loan. This can be interesting if the purchase price is very high. In this case, the installment loan quickly reaches financially affordable limits.

An amount of 20,000 euros, financed to 60 months, means a monthly rate of 359.80 euros with an effective interest rate of 3.09%. This must be done monthly in addition to all other expenses. Alternatively, to reduce the monthly rate, the term could be increased. However, then the loss in value and repair costs of the vehicle must be considered.

As an alternative, banks offer a so-called “gallon financing”. This means that a car will be financed over a period of 3 to 4 years and will end up with a final installment. The advantage of gallon financing is significantly lower monthly rates. An amount of 20,000 euros, financed with an effective interest rate of 3.09% to 60 months, resulting in a final rate of 10,000 euros, a monthly rate of 208.60 euros.

Three-way financing

This is based on the gallon financing. At the end of the term, the borrower has the option to buy, refinance or return the vehicle to the dealer at the residual value.

Finance alternative leasing

For lease financing, monthly installments are paid over a period of 3 to 4 years. At the end of the lease, the lessee has the option of purchasing the vehicle at the agreed residual value or returning it to the car dealer. Then the vehicle was rented until the end of the leasing period.

Loan

A loan is a long-term loan with a repayment agreement. The loan is usually used for higher sums and long maturities (eg home equity financing).

Requirements for borrowing

No matter which type of loan is ultimately chosen, borrowing is always conditional. So, the borrower must be at least 18 years old. A sufficient creditworthiness must be given. The more creditworthy the claimant is, the lower the interest rates. The lender may require additional collateral.

Tips for searching for credit

Compare financing offers exactly

Whatever type of loan is sought, numerous comparison portals on the Internet offer help. After entering the basic data (loan amount, maturity, usage), the advantages and disadvantages of a loan are clearly displayed.

The criteria are fast payment, acceptance rate, special repayments possible, free total redemption possible, digital degree or post-ID procedure.