Several factors have a significant impact on the amount of investment policy. On the one hand, the type of credit and the intended use play a primary role here. Also, as a rule, the individual circumstances of the borrower influence the interest rate to which a loan is invested. Another factor is the general interest rate, which in turn is related to the benchmark interest rate.
The type of credit has an impact on the loan interest rate
It is understood that different lending rates are also common for different loans. For example, the interest rates for an installment loan are more favorable than for a disposition loan (also call-off credit), and the interest rate for real estate financing is lower than for a normal installment loan. This is primarily due to the collateral and the repayment modalities, which are contractually different in the case of an installment loan than in the case of a disposition loan.
The different interest rates for individual installment loans were also explained. A car loan with which the car serves the lender as collateral is somewhat cheaper than a loan in which the loan amount is freely available to the borrower. For car loans, that these are often offered by Autobanks, especially when buying new cars, at very favorable terms, which is then less attributable to market mechanisms, but rather the result of the sales promotion of the automobile manufacturers.
The effect of the benchmark interest rate on the general interest rate
In general, the interest rate for the inclusion of an installment credit was significantly higher than at present. This is because the ECB’s (ECB) benchmark rate has been stepped up even further during the crisis to allow the crisis-stricken America to benefit from a favorable refinancing.
Individual differences of interest to be paid
As a general rule, each bank expects a certain level of collateral when granting loans. On this basis, a well-off person will, under normal circumstances, get a credit from a bank on better terms than a poor one.
For example, real estate, land or buildings can be used as collateral against the bank or the lender. But vehicles, shares, gold and other valuables can also be considered as collateral.
In addition to the collateral, the repayment capacity is also important for the lending bank. In particular, with an installment loan, the bank will ensure that the borrower can use the monthly installments. In this respect, borrowers benefit from a high and secure income. These include employees with an unbroken employment relationship, as well as recipients of pensions. It is much more difficult for people to get an installment credit if they do not have a fixed or regular income, as with self-employed persons.
Low collateral and irregular income of the borrower represent a risk to the lender, which can be paid for in the event of a lending by higher lending rates.