Whoever takes out a loan would like to keep the associated costs as low as possible. A low credit is required. But what does the amount of credit depend on? Here, several factors play a role, which we can illuminate in our guide.
Interest rate influences the market interest rate
Looking at the various factors affecting credit, the key interest rate, which is defined by the American bank, is of paramount importance. The key interest rate determines the rate at which the commercial banks can borrow money from the central bank. As the commercial banks return indirectly to the consumer via consumer loans and savings banks, the central bank can control the market interest rate by adjusting the interest rate. While a low-interest rate and the associated low-interest rate level are beneficial to borrowers, investors would be more pleased to see an increase in the benchmark interest rate to generate a higher rate of return.
Currently, the benchmark interest rate is 0.75%. This is also referred to as a so-called low-interest phase. All borrowers who wish to take out a loan at present are equally affected by the policy rate. Although the individual borrower can not have any direct influence here, it is probably possible to secure the currently favorable credit rates using long-term interest rate fixing. The borrower must then first be not afraid of an increase in the general interest rate.
Term and loan height causing external influences on a loan’s interest rate
While the key interest rate has an impact on the overall market interest rate and thus on all borrowers, there are also various factors which only affect the interest rate of the individual loan offer. These factors include both the duration of the loan and the amount of the loan. As a rule, banks expect a higher interest rate for a longer credit period. The same is true for the loan sum. It is customary for many banks to increase loans with increasing credit. For the borrower, this again means that he/she has the possibility to turn something on the interest rate by an appropriate adjustment of maturity and credit.
Use of the loan amount
Sometimes it is also in the case of the granting of loans that the use of the loan amount can have some influence on the interest rate. There are also specific loans, such as auto credit. This means that the borrower is only allowed to use the loan amount for certain things, in this case, the purchase of a vehicle. On the other hand, this restriction of the possibilities of use is then rewarded by the banks with a more favorable credit.
Personal factors of external influences on a loan’s interest rate
In addition to the objective factors such as the credit term and the loan rate, personal factors which are based on the financial framework and financial situation of the individual borrower also have a significant impact on the credit. These are referred to collectively as creditworthiness or creditworthiness.
When determining the creditworthiness of a borrower, many different individual criteria are combined. This is based on the score of the Schufa, which is calculated using the data collected by the borrower in the past. It takes into account, for example, whether the borrower has always paid his payment obligations on time. Nowadays, however, the banks do not rely solely on the score of the schema in the credit assessment, but also allow further factors to be included in the valuation. These include:
- Amount of regular income
- Amount of monthly expenditure
- Financial assets
- Marital status
A bad credit rating results in the banks demanding a higher credit from the borrower, as they are more likely to be exposed to credit losses. This is the reason why borrowers have to keep track of the fact that they ultimately have to pay a significantly higher interest rate than was originally advertised by the bank. In the worst case, the credit application can even be rejected altogether.
In the meantime, however, there are also some banks that offer so-called fixed-rate loans or credit-free loans. In this case, the personal creditworthiness of the borrower has no influence on the interest rate, but only on whether a loan is granted at all.