What to mind when taking out a loan

In 2014, the European Central Bank (ECB) is continuing its strategy of stimulating the European economy with cheap money. To do so, the ECB is keeping the base rate at the current record low of 0.25 percent, as announced in a press release on January 9, 2014. This is good news not only for banks, but also for bank customers and especially for those who are currently considering taking out a loan. Since the interest rates of commercial bank credit and savings products are based on the ECB’s base rate, there is usually a direct effect on the terms of the contracts. If the base rate falls, banks can obtain money from the ECB at better conditions and are thus able to offer their customers more favourable contracts.

Read the small print for credit costs

Despite the favourable economic situation, it is important to stay calm. Many banks are currently promoting attractive loan offers. Nevertheless, you should proceed with caution when choosing the credit company. Anyone wishing to benefit from a favourable loan for a long time would do well to obtain sufficient information in advance and to keep an eye on the interest rate and monthly installment as well as any additional or processing fees. According to the credit guide of the comparison portal finanzscout24, one should pay particular attention to the following aspects when assessing an offer:

• Annual percentage rate of charge – The annual percentage rate of charge are the annual costs in relation to the amount of the loan. It is usually expressed as a percentage.
• Service and processing fees – Before signing a contract, check which fees the bank charges for processing or other services.
• Additional fees – Should you deviate from the credit plan, additional costs may arise, such as an early repayment penalty, which banks may charge in the case of an early redemption.

Particularly favourable conditions are often offered by online loans. Direct banks, which have higher expenses due to the maintenance of offices and higher personnel costs, are mostly not able to keep up with the credit conditions of online banks. Online banks, on the other hand, often do not offer their clients personal advice.

How to avoid unpleasant surprises

Even if the circumstances for a loan are favourable, taking out a loan should be a well-considered step. Take your time and get enough advice! Use free counselling offers and avoid expensive hotlines. The more providers you compare, the better are your chances of finding a good offer. Do not only compare the annual percentage rate of charge, but also any processing and service fees. Avoid private credit brokers and non-secure loans. Such offers often involve dubious providers.

Important: If you have a bad feeling after signing the contract, act quickly and use your right of withdrawal. Trustworthy providers usually grant their customers a right of free withdrawal. A safe option is the Norisbank’s low-interest guarantee. Here, you can return your loan four weeks after signing the contract if you find a cheaper offer from another provider.