Take out credit: make more of your financial resources
What loans are there and what can they be used for? What should you watch out for? And what do Germans prefer to finance with credit? We’ll tell you here.
What are loans taken out for?
Loans are popular with Germans – especially in times of low interest rates. Our study also showed that. Cars (48 percent), furniture and fitted kitchens are particularly popular with it. But also to replace an already running, more expensive installment loan, to balance the current account or to buy electronic entertainment media and household appliances, financial assistance is repeatedly used. Construction and real estate finance are also very popular (63 percent), because the vast majority of those who want to buy their own home have to borrow money.
Younger people also sometimes take out student loans to finance their vocational training. For example, 34 percent of 18 to 29 year olds were willing to finance training and further education with credit, 21 percent for special family occasions such as a wedding celebration. Germans rarely use a loan to buy luxury goods such as jewelry (3 percent).
Interestingly, there are clear differences between the sexes when it comes to credit: men would use a loan for entertainment or consumer electronics more often (30 percent) than women (17 percent) and are also more willing to take out a loan to replace another loan. And while Germans in all parts of the country largely agree on home ownership, cars or renovation, on average twice as many people in the north were willing to use them to finance a vacation than elsewhere.
What are loans taken out for?
Take out a loan: what are the options?
A basic distinction is made between consumer loans for private individuals and corporate loans, as well as between earmarked loans and those with unrestricted use.
Those who know exactly what they are going to use the loan for are often well advised to opt for an “earmarked loan”, as this usually has significantly lower interest rates. Anyone who wants to use the money for various, not precisely defined purposes, falls back on a “free loan”. So, the reason a person takes out a loan determines the type of loan.
Earmarked loans may only be used for the specified purpose – this is the case with a real estate loan or a car loan. But the modernization and refurbishment of a property can also be financed with a dedicated loan.
The intended use is then precisely recorded in the loan agreement and must be proven by the borrower, for example with the purchase confirmation of a car. The advantage of earmarked loans: They are usually available at lower interest rates because the financed object serves as security and the lender is therefore less risky. For example, if the buyer of a car can no longer repay his earmarked loan, the lender can sell the car. There is therefore no financial damage to him.
Typical earmarked loans include:
Mortgage lending or real estate loan
Loans for free use
As the name suggests, free loans are not tied to a purpose. For the lender, however, this means a higher risk, as they cannot estimate what you as the borrower are using the money for. Despite the current low interest rate, free loans can therefore be expensive – for example if you take out an overdraft facility and have to pay up to ten percent interest for it.
Typical loans for free use are for example:
The individual types of credit differ not only in their purpose, there are also different options for repayment. The following four types of credit are particularly popular:
Take out credit: overdraft facility
There is no separate loan agreement with this loan. The flippant “Dispo” loan refers to the overdraft of the current account. It is determined in advance by how much the account can be overdrawn and what the exact conditions are. The overdraft facility is therefore a very uncomplicated loan that is immediately available. However, the overdraft facility is only available for expensive money, as the so-called overdraft interest is usually very high. Whom