Credit with final installment
A multitude of wishes, which the consumer would like to meet, often stand in the way of the limited financial possibilities of the individual. For most people, larger purchases, be it a new car, new furniture or the purchase of a home or a home, with their own funds not immediately financed. But saving years or hoping for a lottery win to afford certain things that exceed the cash balance, but improve the quality of life, that is out of the question for most. Therefore, more and more people use the opportunity to take out a loan.
What is a loan with a closing rate?
- What are the benefits of the loan?
- What is a loan with a closing rate worthwhile for?
- What is to be considered?
- What is needed for the application?
- Where to apply for loans with final installment?
What is a loan with a closing rate?
As different as the intended use for the loan amount so varied are the types of credit. From small loans over construction and personal loans to car loans with graduation rates, these installment loans with their different maturities and interest rates are adapted as closely as possible to the needs of the applicants . This includes the loan with closing rate. Although each financing includes a final installment, with the payment of which the loan is replaced or the borrower changes from the owner to the owner of the respective object for which he has accepted the sum of money.
However, in the case of a loan with a final installment, this last payment differs from the installment already paid. Preferably, the credit at closing rate is used to buy a car, with the repayment modalities being very agile.
The financing can be divided into different sections, either with down payment or by trade-in of the old car , so that part of the purchase price is already covered. The remaining amount is then split as a loan, partly over an agreed period, usually from 3 to 4 years, in constant monthly installments.
After this period, a higher final installment is due, with the settlement of which the buyer becomes the final owner of the wagon. Of course, the financing is possible without down payment, which then increases the corresponding loan amount. This form of borrowing is also known as balloon financing and is very similar to the leasing model when buying a car. Because many car dealers offer the borrower at maturity of the final installment the possibility to waive the last payment and return the car to the dealership as the owner.
Furthermore, the final installment, which can not be paid in one amount at maturity, can be further converted into follow-on financing.
What are the benefits of the loan?
The lock-up credit allows high initial costs to be divided into small monthly installments that minimize the financial burden on the consumer. Interest rates tend to be lower than a normal installment loan . Especially when borrowing is already foreseeable that at the time of maturity of the final installment, a larger payout as expected from a life insurance, this loan type can be positively evaluated.
If, on the other hand, the financing of the final installment on the conclusion of the loan is unclear, the borrower will accept that the interest calculation applies to the total loan amount, even if it may be necessary to follow-up financing with new and often higher interest rates to pay off the final installment. Therefore, the positive as well as negative aspects, such as the low monthly installments or the extent to which the financing of the final installment has already been clarified, should be considered entirely according to the individual requirements of the respective borrower .
What is a loan with a closing rate worthwhile for?
When the loan with final installment or even balloon loan at the end of the term, a high rate is provided. When buying high-quality and expensive consumer goods, such as cars, this form of financing is very often applied. You have very low and constant rates over a certain period. At the end of the financing is then the final installment. This is often many times higher than the current installments. The so-called balloon can be replaced in the end in cash.
To save further costs and interest this is the best alternative. By further financing the loan at the same or another bank, high interest rates are usually incurred.
In a car loan with balloon rate, there is still the three-way financing. It is similar to the lease. You return the vehicle to the dealer or just finance this closing rate and keep the vehicle . Other banks are generally not interested in buying the vehicle.
What is to be considered?
When buying a vehicle, you can apply for a final installment financing directly from the car dealer. Within a few minutes you will receive the answer from the bank. There are several possibilities .
The pay is sufficient and the bank agrees to the loan application. If the income is too low, a liquid guarantor or a higher down payment may be required. The age of the applicant also plays a role.
Should a negative Schufa exist, the bank may refuse to pay the financing after this examination or may also demand a guarantor or a higher down payment .
What is needed for the application?
To apply for the loan you need payroll accounting for the last 2-3 months . A new employment relationship often requires a permanent contract of employment. A valid identity card or passport with resident registration certificate is required as well. Pensioners need the pension notices as proof of income.
Good to know:
Freelancers or the self-employed require economic evaluations in the form of account statements and income, surplus invoices or profit and loss statements. Since the income here is less secure than that of an employee, it poses a greater risk to the banks. This often requires a guarantor or the bank requires higher interest rates.
Where to apply for loans with final installment?
The completion of a balloon financing can also be done online . The same documents are needed as mentioned above. Mostly, the bank also wants the purchase contract for consumer goods. Initially, this form of financing was only offered by auto banks, but now almost all banks offer this form of financing.
Balloon financing is similar in form to leasing. One must note the ownership is different. In leasing, the bank is the owner of the vehicle and the lessee is only the user. When financing at closing rate, the borrower is also the owner of the vehicle, as with any other loan as well.
A final installment always carries the risk that you can not pay the high rate at the end of the term. If you expect a high sum of money at the end of the term, eg from an insurance or a home savings contract, you can opt for this form of financing . One should not only consider the low monthly rates, but the large rate, the so-called balloon not ignore.
If you want to keep the cost of financing rather low, then you prefer to install a installment loan . These are also available with long terms to keep the monthly burden low.