A fixed rate loan is very popular among consumers. In contrast to loans where the interest rate depends on the creditworthiness, it offers a significantly better comparability of the conditions. In addition, the additional costs can be assessed immediately and also compared.
Disliked by banks
In the case of a loan with a fixed interest rate, the interest does not, as usual, result from the loan amount, the term and the individual creditworthiness, but only from the loan amount and term, the creditworthiness does not matter. Applicants for fixed-rate loans can rely on the conditions specified by the institutes. It is impossible that much worse conditions are presented as a surprise when lending.
It is almost logical that a form of loan pleases the borrowers, and the lending banks do not have as much interest in it. Few banks have had such loans in their program in recent years. However, the number of loans with fixed interest rates has increased significantly recently. The credit institutions have discovered the market for customers with poor or medium credit ratings and ushered in a rethink. Customers with a good credit rating should, however, forego a loan with a fixed interest rate and instead choose a loan with a rate-dependent interest rate, since these are usually cheaper.
Fixed rate loans have advantages and disadvantages
However, there must always be a minimum of creditworthiness when applying for a loan. It does not matter whether it is a loan with a fixed interest rate or a loan with a credit-dependent interest rate. Borrowers should carefully consider the type of loan they choose. This is especially true for borrowers with poor credit ratings. In the case of credit-dependent loans, it is almost always possible to grant a loan, if necessary using a high interest rate. In contrast, a loan with a fixed interest rate quickly rejects if the creditworthiness does not meet the corresponding interest rate.
As a guideline, it can be assumed that the very cheap loans with interest rates of 5% to 6% are given to people who have an optimal and very good credit rating, have a fixed income, a clean Credit Bureau and more Have collateral to offer.
The fewer of these requirements are met, the more the interest rate applied by the bank rises. However, it is up to each bank to decide which base rate it estimates for the best credit ratings and how quickly this increases as the credit rating deteriorates.
Fixed-rate loans are currently available on the market at conditions between 4.1% and 12.99%. The loan amount is usually limited to 25,000 per loan, with a term of 84 months.