All-purpose loan – what to pay attention to the all-purpose loan
A general purpose loan, or even a loan without earmarking, is a form of credit which has no fixed purpose. An earmarking to the bank, in which the credit is taken, thereby eliminating and thereby opens up some possibilities of use.
Thus, the sum, which was taken as credit for any purpose, can be freely and independently invested without a bond. As a result, the cost of interest is usually slightly higher than other forms of credit. Before such a loan is taken, some important information on the subject should be explained.
Important information about general purpose loans
The biggest advantage of a general purpose loan is its flexibility: it can be freely used, and even be used for several different investments. Most installment loans, which are taken out at banks, are loans of the general purpose.
However, since the bank generally has no security of repayment, the interest rates for this type of loan are higher than for other types of loans.
Under what conditions can a loan be taken for any purpose?
In order to take out such a loan, certain conditions have to be fulfilled in general, but these can differ in each bank and in each amount of the loan. Basically, however, the bank pays attention to a fixed monthly income as well as certain assets such as mortgages of the customer.
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Precisely because of this, the inclusion of a general-purpose loan for students, freelancers or self-employed is more difficult than for employees who are in a permanent employment relationship. It is therefore particularly important that a fixed monthly income is available, as this is considered as security for the respective bank.
For which financing can such a general purpose loan be used?
There are no limits to financing for most general purpose loan forms. Most of these, however, are used for home purchases, car finance, vacation financing, renovation, rescheduling or as a small loan for small-scale investments and acquisitions. Some banks also note in the contract documents of such a loan some exceptional uses for which the loan may not be used.
Which conditions are relevant to the specific form of the loan?
Generally, all types of loans, which can be completed for any purpose, have certain conditions that must be considered. The most important conditions include the annual percentage rate and the debit interest. The debit interest rate indicates how high the interest rates for the respective loan are. The APR also gives the interest, but still calculates the additional annual fees that may be incurred.
Other important terms include term, free uses, risk coverage costs, the cost of a possible increase in credit, total credit costs, possible special repayments and the possibility of a joint loan.
Example of a general purpose loan
When calculating a loan for free use, the duration and the amount of the loan play the most important role in order to get a quick overview of the possible costs. In this example, a general purpose loan amounting to 10,000 euros will be added. A term of 60 months or 5 years is selected, which represents an average value for this amount of the loan. Depending on the bank, monthly rates between 160 and 200 euros can be expected under these conditions.
The borrowing rate is usually between 0.7% to over 5% and also the annual percentage rate of charge varies depending on the bank in this spectrum. However, other factors have a high significance for the monthly installment.
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Is the all-purpose loan really necessary?
A loan for any purpose sometimes seems better at first glance than it really is. Therefore, all information and conditions should be examined in detail. In addition, it should first be established whether or not such a loan is actually needed urgently. If a bank decides on a specific general purpose loan, special attention should be paid to the best possible unscheduled repayments, fast loan processing and customer service, which is service-oriented.
In addition, a fixed interest rate that can not be changed or adjusted annually by the bank is of crucial importance. Also on additional costs, which may threaten, should be respected.
Which purpose should I specify?
Although this type of loan is a general purpose loan, most banks must provide a reason for using it. Here the most different reasons can be registered. However, it should also be noted here that the likelihood of a quick processing and a fixed issuance of the loan will be significantly faster if the bank is presented with a particularly comprehensible purpose.
In addition, some banks request evidence of the actual use of the loan for the stated purpose. However, applying for such proof is far from being the case at every bank, and many banks also accept multiple uses.
What role does the Credit Bureauauskunft play?
As a rule, when concluding a loan for any purpose, the bank requests information about Credit Bureau’s borrower’s accounts, although there are also loans in which, according to some banks, Credit Bureau information is not required. Here, however, caution is advised : It should pay particular attention to the information and conditions of the bank, which makes such a promise, since this bank often requires a higher than average interest rate and additional fees.
Recipients of benefits or persons who have a negative Credit Bureau balance sheet should therefore think twice about whether making such a loan makes sense.
Read the fine print
Before concluding a loan for any purpose, you must also pay attention to all information in the Terms and Conditions. Especially the information, which refers to the deadlines for termination or revocation, should be given special attention. It is often advisable to resort to loans from banks, which have an extended withdrawal period of, for example, 2 or more months.
Under European law, however, each bank has a period of at least 14 days notice. In this the customer can decide to revoke the contract and to cancel it.
Compare several offers for general purpose loans
Lastly, before applying for a general purpose loan, it is definitely worthwhile using a loan calculator or other means of comparing the interest rates of individual banks. Of course, special attention should be paid to hidden additional costs. First of all, it makes sense to use a bank that is bound by the EU Consumer Credit Directive. Apart from that, however, attention should be paid to possible prepayment fees, which are incurred when customers prematurely replace loans.
Payments that may change as a result of a change in credit lines and fees incurred in the event of a delay in monthly installments should also be respected.
At the present time, credit is no longer unusual: more and more people are applying for a loan to either fulfill a private request, pay an invoice, or even make an urgent purchase. Particularly popular here is in particular the general purpose loan. It is a purpose-built, multi-purpose loan that is now being offered by many banks as a product. We’ll show you what it’s all about and what should be considered when concluding.
The general purpose loan – what exactly is that?
In a general purpose loan you have basically free choice, as far as the purpose. You can use it, for example, to finance a car or to buy a new TV. You do not have to tell the bank what you want to use the money for. However, there are some requirements that must be met in order to use the loan.
As with all other normal loans, it is important for the borrower to have a steady income and be able to offer the bank certain collateral. This can be a property, stocks or valuable items. Some banks also forgo security when the borrower has a good credit rating and the income can certainly pay off the borrowing costs.
Thus, the all-purpose loan is actually worthwhile for anyone who is short-term cash-dependent and wishes to fulfill, without having to save long.
What should be considered when concluding a loan agreement?
For the borrower itself, it is important to think carefully in advance about how high the loan amount for the general purpose loan should be.
Because: Of course it is very tempting to be able to accept a large sum, but one should never lose sight of the fact that this also entails a great deal of responsibility. So always spend only as much money on a loan as you actually need and can pay back safely.
Also has to be considered the duration: A long term is certainly attractive once, because the monthly installments are much cheaper and you stay liquid. On the other hand, it should not be forgotten that the cost of the loan increases quite considerably if you choose a longer term – because of course you pay additional interest for each new month.
It is basically always better if a loan can be repaid as quickly as possible, but the burden should really fit well into the budget. After all, unexpected costs or high bills can come at any time to those you did not think about before.
A good tip: Make sure that the bank offers its customers a break in the event of a financial shortage. In this way you do not take too much risk if you can not pay the loan once safe and thus has the opportunity to suspend the loan repayment for a period of time.
What should be considered when choosing a suitable general purpose loan?
The interest rate is certainly one of the most important criteria when it comes to choosing a suitable loan for yourself. When comparing different banks, the focus should always be on the effective interest rate, as only this will include all additional costs. Not only are the interest on the loan, but also other processing and administration fees.
In addition, it is of great importance not to decide on the first credit offer on the market, but to take the time to find a suitable bank where the conditions are right. An online comparison that helps you to find the cheapest all-purpose loan is most helpful here.
Various comparison portals now offer this completely free of charge and thus provide a good overview of all loans offered on the market.
The application is then made directly online: The applicant enters all relevant personal data in online forms and may need to provide further evidence – such as on the income or on its positive credit rating. These documents are then checked by the bank before it gives the customer a credit note.
A general purpose loan is an installment loan that has no fixed purpose – so you can use the loan for a variety of options. Whether it’s buying a new car, financing a trip or even settling a bill – all this is no problem with a general purpose loan. We show you what to look for in comparison and what benefits the loan offers.
The all-purpose loan a deeper look
Meanwhile, all-purpose loans are offered by a variety of banks, of which now a large part offers a credit brokerage over the Internet. Because a general purpose loan is a standard installment loan, the applicant’s examination is usually relatively straightforward. All that matters is a regular income and a good credit rating. If it is a larger sum, however, it may be the case that the bank needs more collateral and, for example, requests statements of account proving that the borrower is solvent.
The sum can be individually agreed by the borrower with the bank and is usually between 1,000 and 50,000 euros for a general purpose loan. Likewise, an appropriate repayment term for the loan must be agreed with the bank, which fits the financial scope of the borrower.
A general purpose loan can basically be taken by any person of legal age, provided they have a fixed income and can safely repay the loan installments. Since it is a purpose-based loan, the loan can be used for a variety of ways.
What to look for when taking a general purpose loan
There are a number of aspects that must be taken into account when taking out a loan – this is the case with the general purpose loan as it is with all other loans. First of all, borrowing money is no longer uncommon today: most people finance certain things, be it new furniture, a car, or even a trip. However, this does not mean that you should be frivolous with your finances. Basically, only as much money should be raised as credit, as can reliably be repaid to the bank.
Accordingly, the runtime must be planned correctly:
A short maturity is always recommended, even if the credit installments are slightly higher, as this avoids unnecessary interest costs. Still, the rates should really be high enough not to put too much of a financial burden on the budget, and also keep some of the room for unexpected bills or other payments.
Just because there is now a large selection of banks that offer a general purpose loan as a credit product, customers should pay attention in any case, not immediately decide on the first offer. Above all, it is important to pay attention to the effective interest rate. In contrast to nominal interest, the APR includes all the costs that the bank charges its customer for taking out the loan. In addition to the pure interest, which are added to the loan, these are also handling fees and other costs.
For some years, credit institutions in Germany have been obliged to tell the customer exactly what the APR will be. Therefore, the focus in a credit comparison should always be on this information in order to perform a realistic cost comparison.
How can a credit comparison be made for the general purpose loan?
If you are looking for a suitable general-purpose loan, it is best to take a look at the Internet first: Here you have the opportunity to carry out a free credit comparison, which can quickly filter out the cheapest offer. All that is necessary is the input of some relevant data: You enter what the desired loan amount and the duration should be – then the computer evaluates this data.
Now a clear table is created, in which all available credit offers of different online and branch banks are displayed.
Now all you have to do is choose the best deal for your general-purpose loan and you can then go straight to the bank’s website. The payment will be made as soon as all application documents have been submitted in full and successfully verified.