Anyone who wants to buy, build or buy real estate often requires a loan. The same applies to purchases of consumer goods that are to be financed through a loan. To get a loan
Nature of the loan application
The application is ultimately a list of all relevant data for processing by the bank. A distinction is then made between the applicant’s personal data and the credit data itself.
Banks want to know who they are dealing with. Personal data includes name, date of birth, data on marital status and data on living situation and data on professional situation. In particular, information on the marital status is of high importance for the approval of the loan. Banks take into account an income share per family member, the so-called subsistence minimum. This is between 600 and 750 USD, for each additional person about 200 USD. Each bank determines the actual amounts individually.
The household consists of the spouses and two children. Only the father works, his net income is 2,500 USD. The minimum subsistence level of the bank is 650 USD for men and 200 USD for each additional person. The disposable income here is USD 1,250 (2,500 -650-600).
The determined disposable income is the upper limit of the credit rate. The professional situation must be stated as additional information in the loan application. This is crucial for securing income. In the case of civil servants, for example, income is guaranteed, but the situation is different for temporary jobs or self-employed persons.
The credit details are given in the loan application. The key points here are the type of loan, the interest rate and the fixed rate, as well as the possibility of special payments.
There are three types of credit.
The central point in annuity loans is the constant loan rate. This consists of the interest portion and the repayment portion. The regular repayment reduces the interest portion permanently, at the same time the repayment portion increases by the same amount. However, if the loan interest rate changes, the interest component changes accordingly.
- installment loans
With the repayment loan, the repayment portion of the total rate is always constant. The interest component is steadily reduced while the interest rate remains the same. The overall rate is thus reduced by the respective interest savings.
- Total loans due
During the loan term, only the loan interest is charged as a loan installment. The loan is repaid at a predetermined time. The repayment amount usually results from life insurance that is due, from home savings contracts and other one-off cash inflows.
credit interest rate
The type of interest is specified in the loan application; this can either be a variable interest or a fixed interest.
In the case of the variable interest rate, the loan rate changes in accordance with the capital market rate. It becomes problematic when interest rates rise dramatically. If you want to rule out this uncertainty, we recommend that you fix the interest rate. The loan interest rate is fixed for a certain period. As a rule, this is 10 to 15 years. During this time, the lending rate remains constant, even if the capital market rate changes.
For the possibility of special payments, it is crucial how the interest is paid on the loan. With variable interest rates, special payments are always possible. It is different with fixed interest rates. As a rule, no special payments are permitted here. If you still want to make special payments, this must be stated in the loan agreement.
A special type of special payment is the early repayment of the entire loan. During the fixed interest period, this is only possible against payment of a prepayment penalty. From a bank’s perspective, this is for lost interest. Full repayments are possible for variable loans, however notice periods should be observed.
The loan application forms the basis for the loan approval by the bank. The information determines whether a loan is approved or not. Before the application is made, intensive advice should be given to the various loan arrangements.