The car must urgently in the workshop, a new washing machine must be purchased or it should just go spontaneously on vacation: cash advances can be the solution. Often, our desires and needs are greater than our financial leeway. Even though the overdraft on the current account has been exhausted, more and more consumers are considering taking out such a loan.
Which loan is the right solution for which requirements?
In the ads and commercials of banks, credit institutions or even credit intermediaries, the possibilities of raising money seem to be almost unlimited and easy. But if you do not want to pay over-priced credit installments or even want to fall into the debt trap, then you should inform yourself about the modalities before taking out a loan. And, of course, about the different forms of a loan.
In principle, the payment of such a loan can be made in two ways: The loan amount is transferred to a current account of the customer or there is a cash payment of the sum. In the second case, one speaks of a cash advance. In addition to the fact that the agreed amount is paid in cash to the applicant after the conclusion of the contract, the cash credit is usually characterized by a property that is important for many consumers: unlike other types of credit, it is not enough to apply for the loan and actually pay little time.
For this reason, this form of provider is also advertised as ” instant loan “, “express credit” or “quick loan “.
Whether cash advance or other loans: compare different offers
Not only banks, but also smaller companies now offer various forms of cash credit. Unfortunately, it should also be noted that the sudden shortage of money is attracting more and more dubious providers : Even if the competition with banks and savings banks is fundamentally very positive for consumers, behind offers such as “Immediately 10,000 Euro cash and without private credit” can be completely overpriced and hide numerous high processing fees.
Therefore it is definitely worthwhile to compare different offers for a cash advance before signing the contract. An important help here can be the Internet: On different credit portals, the various offers can be compared relatively easily.
Also the websites of the different banks and institutes usually offer the possibility to apply for an online cash credit. The money is transferred here immediately to the account or possibly also delivered by courier. However, additional fees are usually charged for this service.
Of course, the personal conversation with a variety of banks at the place of residence is, of course, recommended. If you have a good credit rating, you will most likely get a cash advance at your bank. In other cases, the deposit of collateral (such as the vehicle registration document of the fully paid car) may lead to the granting of a cash credit. The payout of the cash advance is then ideally at the counter.
In general, a cash advance is characterized by the fixed rates for repayment and a pre-defined term through a high degree of planning. Each borrower should accurately calculate what (usually) monthly installments he can safely complete before making a loan.
It also has to be decided individually whether one wishes to make use of the various types of insurance offered in the event of a payment default (eg illness or unemployment).
Also applies to the cash advance: Before signing the contract check exactly
As with all other loans, a cash settlement is an intensive comparison of all offers and conditions and fees worth cash. One criterion is the annual percentage rate. This interest quantifies in principle the costs that the borrower has to pay for the amount borrowed per year. Dependent is the annual percentage rate of interest on the bank, the term and the fees incurred. For many credit providers, the APR is often based on the creditworthiness of the customer and is higher for cash loans than for other forms of credit.
Before the contract for a cash advance is signed, however, the other provisions should be scrutinized. For example, the possibility of free special repayment often plays a role for many consumers. In any case, should also be paid to the completeness of the contract. So whether the legally required information, such as term, loan amount, borrowing rate, type of loan or amount of the average total cost are listed.
In any case, it is worthwhile to be informed in advance about the legal provisions – and also about the current interest rates, fees, etc. – in advance conscientiously.
Who can apply for a cash advance?
In principle, of course, any (legal and adult) person can apply for a cash advance. Self-employed and freelancers – without the corresponding securities – but usually very hard to get a cash advance, as they have no regular income.
Employees, workers, etc., who can demonstrate a regular and fixed income, on the other hand often receive a cash loan without any problems, provided loan amount and installments correspond with their income. On the other hand, non-employed persons as well as retirees have to cope with higher hurdles when granting credit, since they are subject to a higher default risk with regard to repayment. To obtain more difficult – and more expensive if granted – is a cash advance also for people who have one or more negative entries in an economic or consumer information agency such as the private credit. This happens if, for example, in the past payment agreements against. Banks, insurance, etc. were not respected.
In these cases, there are various providers who offer a loan “without private credit”. Here it is recommended even more to check all modalities of the contract very carefully.
If everything fits, the payout will be fast
However, if there are no legitimate doubts about the cost of the loan, the modalities of the repayment and the seriousness of the provider, the quick payout of a cash loan is usually no more obstacles. How much the total cost of this type of fundraising depends, among other things, on the desired duration.
Basically, the longer the term, the higher the cost. Depending on the amount of the loan amount, terms between 12 and 120 months are usually usual.
Finally, it can be stated that of course a cash advance always costs money. But if there is no other option and a certain sum is urgently needed at short notice, a cash advance can be a sensible option.
In any case, before all offers should be compared exactly and the contract will be signed only when all details are clarified beyond doubt. That ensures that you can sleep well even in the short term, even in the future!
A cash advance is a financial product or tool that comes into play when there is a financial need for a private or legal person that the potential borrower can not cover from their own resources. There are different types of loans.
In the private banking sector, there are z. For example, the classic consumer credit for furniture or technology, car loan, real estate financing, study or education loan, overdraft or overdraft and more.
Depending on the type of loan, there are also different prerequisites that must be fulfilled or clarified when applying. These include such items as equity, credit rating, number of borrowers and much more.
Credit application – what should be considered
The following remarks refer to the loan application of private persons as usual for the most common type of loan, the installment loan. First, the legal requirements must be checked in order to submit a loan application. The borrower or borrowers must all be of legal age, thus fully capable of acting and that means quite concretely for Germany: the 18th year must be completed.
In certain cases, younger borrowers may borrow, but only with the consent and signature of the parent or guardian. Depending on the nature and duration of the loan, many banking institutions refrain from granting loans to people over a certain age (for example, real estate financing, since it often runs for 20 to 30 years and the average life expectancy is taken into account when deciding on lending). Statutory upper age limits do not exist.
Solvency and creditworthiness
Next, credit institutions will check the solvency of the applicant. These include such items as the already mentioned credit rating, income, any existing assets or other collateral such as real estate. How much or what is checked in which form depends very much on the amount and duration of the loan. Important points are the applicant’s self-disclosure in which he discloses his income and expenses, proofs of income from the employer (or other evidence of self-employment income).
In addition, with the consent of the applicant (usually a signature must be made) the private credit is examined. The private credit is a database that collects data on certain financial transactions, loans, their payment history and also personal data of the competent persons, such as the address. These are not only collected, but rated according to top secret criteria. From this evaluation results then the so-called private credit score.
The higher the score, the better the creditworthiness of the potential borrower. In the case of violations, these will also be reported to private credit and stored for a specified period. So-called hard negative features such as sworn affidavits or insolvency usually lead to a serious rejection of credit applications by reputable credit providers.
Equity at cash advance?
For larger loans, such as real estate financing, some lenders, depending on the size of the loan and their own policies, require a certain amount of equity in the total amount of funding. There are several reasons for this: on the one hand, the equity capital is in some sense a security for the bank, that the applicant is serious and also makes an effort to obtain the necessary credit through savings, for example, and not only through third party financing.
Of course, the financing burden of the bank will also decrease. But even for the borrower has the advantages: the repayment of the loan is then progressing faster and thus also decreases the amount of total interest to be paid. The percentage amount of interest may also be lower if the equity is correspondingly high.
However, the interest rate is a complicated network of creditworthiness, duration, amount of funding and a few other possible points.
Which documents are necessary
Below summarized an overview of the necessary requirements and documents. The necessary prerequisites for a successful loan application are age of majority, provable income from dependent or self-employed work and a corresponding credit rating without hard negative features. Important documents include proof of income: account statements for dependent employment or income tax assessment or advance sales tax returns for self-employed persons.
For the legitimacy of the applicant, the identity card or passport must be presented. Further evidence and documentation may be required from the lender depending on the nature of the loan.
Determining the amount of the credit burden before filing the application
It makes sense to calculate the amount of the future financial burden before the loan application and include it in the calculation of income and expenditure for yourself. To do this, the total amount to be funded will be used. This amount, for the example calculation is 5,000 euros, is divided by the desired number of years and months to determine the repayment rate excluding the interest per month.
At five years, there is an annual repayment installment of $ 1,000 ($ 5,000 divided by five years) and a monthly repayment installment of $ 83.33 ($ 1,000 divided by twelve months, one rate diverges as the monthly amount has been rounded down).
The amount of 83.33 euros is the pure repayment portion. For example, if the fixed interest rate is three percent per annum, it will be initially calculated on the total amount. That amounts to 5,000 euros per year, 150 euros interest (5,000 euros by 100 percent, times three percent). Per month there is an amount of 12,50 Euro.
Calculation of the first installment: The redemption amount of EUR 83.33 plus the interest for the first month of EUR 12.50 is EUR 95.83. This is the first installment to pay in the first month.
Now there are two options. Since the interest charge decreases monthly after each installment paid, because the amount repayable decreases, the interest portion would change accordingly and become smaller. Thus, the monthly rate would be smaller.
A sample calculation for the second month:
5,000 euros (total debt at the beginning) less the first repayment installment of 83.33 euros results in 4916.67 euros in debt. Three percent after the calculation above are 12.29 euros interest per month. Together with the repayment rate of 83.33 euros, the second month results in a total rate of 95.62 euros. The rate has therefore decreased overall. So that would go on month by month.
However, many banks offer their customers the option of a constant monthly rate, in our example, 95.83 euros. This has the advantage that the monthly burden remains constant and thus easy to plan, but the repayment share increases every month and the loan is repaid faster.
Which variant is offered, the bank decides.
If both options are open to the borrower, it is the client’s responsibility to decide whether to pay off more quickly or reduce the burden on them.