It is increasingly the case that things have to be financed spontaneously and unplanned, without any existing savings being used or being able to be used. So the defective washing machine must be replaced, the car repaired or other payment obligations are met in the short term.
The frame loan comparison for the optimal financing
- Comprehensive information about the framework credit
- Example calculation of the advantage over the disposition credit
- Possible pitfalls in a framework loan
- Alternatives with bad credit
- Interest rates and their prospects
The frame loan comparison for the optimal financing
The credit line offers a special form of the loan and at the same time a flexible way to bridge a financial shortage without having to use the much more expensive discretionary credit. The following chapters contain much more detailed information about credit and how to best benefit from it.
Comprehensive information about the framework credit
A credit line is a loan that sets a specific amount to which the loan can be used. If you agree with the bank, for example, a framework loan of 5,000 euros, there is always the opportunity to dispose of this money and it does not matter then whether you take the entire sum or only a part.
In principle, it is similar to the discretionary credit, which is, however, occupied by much higher borrowing rates. The interest will not be calculated on the total agreed amount t, but only on the amount currently used. The interest rates are usually – unless otherwise agreed – variable and are based on the key interest rates of the European Central Bank (ECB).
This may also result in interest rate changes during the term of a framework loan if the ECB in turn alters the interest rates. However, the bank must and will inform the customer about appropriate changes in terms and conditions in good time.
When repaying the framework loan is also expressed as a very flexible form of the loan. Thus, the amount claimed can be paid in full within the agreed term or in installments, which in turn do not have to be made regularly or at the same amount. Thus, the framework credit can always be returned to the extent that it is just possible.
Often, however, a regular minimum amount is agreed for the safety of both sides, which is then usually paid as a monthly installment, in order to continuously limit the use.
Such a framework loan is worthwhile, on the one hand, in order to find a permanent alternative to the much too expensive discretionary credit, which can be used to provide additional financial freedom with attractive conditions. On the other hand, if you need a loan for a period of less than a year, it is an attractive variant of a loan.
Such periods are usually not offered by the conventional installment loans. Over twelve months of running time should then rather be covered by such an installment loan, because this is cheaper in such cases.
Anyone applying for a credit line will find little difference to the application for a normal installment loan. Again, the credit rating is checked, which is done on the one hand by inquiries to the Private credit and on the other by a statement of income and expenditure as well as the presentation of salary statements. In addition, the specification of a so-called reference account is necessary. There are then all gel, which is transferred, which one takes in the context of the loan and from where you can then freely dispose of the money.
Example calculation of the advantage over the disposition credit
The big advantage to the discretionary credit can be quickly identified by the currently valid interest rates and illustrated by an example calculation. Assuming an effective interest rate of 4.99% on the credit line and an interest rate on the repayment credit of 9.5% and a claim of 2,000 euros for six months, the following interest calculations would apply:
2,000 euros (loan amount) x 9.5% (interest pa) x 0.5 (half year) = 95 euros
2,000 euros (loan amount) x 4.99% (interest pa) x 0.5 (half year) = 49.90 euros
A difference that makes the attractive meaning and possibility of the framework loan very clear, above all because in the example only 2,000 euros and only half a year goes. The more money you take in and do not repay over an even longer period of time, the greater this savings will be due to the credit line.
There are no special special forms under the framework loans, because the principle of this demand credit is very clear. However, there are differences in the treatment of repayment. Basically, as mentioned above, the return is usually left to you. This means that you can determine the amount and timing of the repayments yourself. For some providers, however, a regular rate is agreed, which is often one or two percent and ensures that always a portion is returned and the burden is never too high.
Possible pitfalls in a framework loan
The framework loan is an attractive form of flexible loan that allows you to bridge short-term financial shortages more cheaply than discretionary credit. In order for it to be and remains a cheap option, there are several features that should be considered and contrasted when comparing the different options.
So it is of great importance whether the current interest rate applies until further notice or is bound to a temporary period. Not infrequently, there are special offers on very attractive terms, which may then apply only for half a year or a whole year, before then a much higher interest rate is recalculated.
In this case, an initial perhaps slightly higher interest rate would have been better, but then permanently on the best terms.
Also pay attention to any additional fees that can quickly offset the benefits of a favorable interest rate. For example, some credit card providers offer a fee for each additional charge on the amount of credit available after the first withdrawal of the money, which is always possible within the appropriate scope.
Especially if you only have smaller amounts, the credit becomes quickly more expensive than you thought. If, for example, you subtract an amount of only € 100 from a corresponding call charge of € 3.90, this additional cost will be equivalent to an annual interest rate of 3.9%, which will then have to be added to the regular rate to see how expensive the fee is Credit really is.
In a comparison, you should therefore choose the variants that waive such a fee or at least allow more than one call toll free.
Alternatives with bad credit
Unfortunately, it is often the case that those who have to bridge a financial shortage in the short or long term are often already in financial difficulties or have been stuck in such financial difficulties.
Not infrequently then there are various entries in the Private credit, which make the credit rating negative, even if the income situation is such that the repatriation of a loan is easily possible. Nevertheless, negative entries in the Private credit in particular lead to a rejection of conventional loans.
The way out is provided by the so-called loans without Private credit, also known as Private credit-free or Swiss loans. There will be waived a request and a message to the Private credit. In return, however, lower credit sums and higher interest rates are to be expected.
Interest rates and their prospects
At present, there is a very low level of interest rates in Germany, which not only affects investments but also loans. That leads to favorable conditions also with frame credits. There are currently variants that offer this form of loan for an effective interest rate of 2.99%.
However, this is usually limited to one year and then rises to a much higher interest rate. These variants are suitable for those who really only need money at very short notice and come with the twelve months.
Anyone looking for a longer alternative to the discretionary credit, currently finds unlimited offers between 4.99 and 5.99%, which is still a significant savings to the discretionary credit.
With regard to the future development of the marginal interest rates linked to the reference rates of the European Central Bank, only speculation can be made. All in all, however, it can be said that the period of low interest rates has lasted so long that interest rates can actually only rise in the long run.
Regardless of how high the interest rates are, it is always a good idea to compare the framework credits in order to always find the one that is best for you.