What can affect interest rates on the installment loan?

The interest rate offers

The interest rate offers

Offers with an interest rate of less than three or four percent are now becoming increasingly common in the area of ​​installment loans. However, it is rarely the case that these very low interest rates apply to all loans and borrowers. Because in most cases, the interest rate is influenced by various factors.

A credit comparison is an important step in finding the best possible offers. In this context, however, it is important to know that the interest comparison usually only includes the best interest rate that the respective provider offers.

For example, if an installment loan is offered at an interest rate of 3.25 percent, this does not automatically mean that this very low interest rate applies to all customers. For this reason, a credit comparison should always include that the investor gets an idea of ​​the conditions under which the favorable interest rate is available. An influencing factor is, for example, the term of the loan. 

ecause with not a few installment loans, the cheapest interest rate only refers to a repayment period of one year. So it may well be that the borrower would only have to pay an interest rate of 3.25 percent for a term of twelve months, while an interest rate of, for example, 5.95 percent is estimated for a repayment period of three years.

Loan amount and customer creditworthiness as influencing factors

Loan amount and customer creditworthiness as influencing factors

Not only can the term of the loan influence the interest rate, but the same applies to the loan amount. When comparing loans, it is currently often found that the very low interest rates are mainly used for loans with relatively low loan amounts. In practice, the customer then pays a loan interest of 3.45 percent for a loan amount of 2,000 USD, for example, while a loan amount of 5,000 USD would cost 5.85 percent.

Above all, the creditworthiness of the customer has an increasing impact on loan interest rates, because more and more banks are offering a so-called credit-dependent interest rate. The bank assesses its creditworthiness primarily on the basis of income, but Credit bureau information also plays an important role.

With such interest rates dependent on creditworthiness, it is quite possible that customers with a very good credit rating only have to pay 3.50 percent, for example, while customers with a rather mediocre credit rating have to pay, for example, 7.80 percent interest.