Overindebtedness: watch out for loans!
It is so easy to get a loan there, there as well and here as well. Especially when it comes to consumer loans, as it is in the background of the credit worth nothing containing, but merely a commodity that is consumed. You quickly lose track of the outstanding debts and interest rates make the financial air thinner and thinner. The Debtor in Austria have advised in 2018 more than 62,000 people, and there was plenty to do for the approximately 120 employees at the Debtor in Austria!
Therefore, you should make absolutely sure that you don’t get into this situation at all, because debts shame, debts make you sick. This is the current state of knowledge in science and therefore it is important to do everything possible not to fall into the over-indebtedness trap and if this happens, it is imperative to contact the experts in debt counseling, who can be found throughout Austria, in good time.
Compound interest and debt collection costs are debt drivers!
Debt counseling reports that high interest rates for overdrafts or loans are the drivers of debt. These then also the reminder and collection costs are added. It is reported by a real example from Carinthia. The debtor had 6,900 USD in debt and 13 years later it was 272,000 USD in debt!
This mountain of debt consisted of 90% interest alone!
What should you watch out for when comparing loans?
If you are looking for and researching cheap loans, you should pay particular attention to the variable term of the loan, the loan interest and your credit rating.
Term of the loan
The loan agreement is determined by the term of the loan. The simple rule of thumb is that the longer the loan runs, the higher the total interest, but the borrower has the option to repay the loan over a longer period of time and the burden of the loan is not too high for the borrower. The term of a loan naturally also depends on the intended use.
Consumer loans have terms of 1 to 5 years, while real estate loans can range from 10 years to 30 years. Banks and you as a private person should make sure that the end of the credit period ends in your working life, because with the pension there is usually a larger cut in the available household income and loan rates you can no longer afford.
Loan interest: nominal and effective
When comparing loans with one another, make sure that you compare the effective loan interest rates with one another. The nominal loan interest is the interest rate at which the banks advertise their loans. But there are also other costs, because some banks charge a processing fee or require a life insurance policy, then these costs are also included and this results in a new interest rate over the entire term of the loan.
Here is then spoken of “effective interest”. These express the actual burden on the borrower. This interest rate is given in percent pa and is ideally suited for comparing the various loan offers of the banks, since here it is actually possible to compare apples with apples.
Credit rating: present yourself well!
Anyone looking for or needing a loan should worry about their creditworthiness. It is not a question of you providing false information (which, by the way, is prohibited), but you should make sure that the various credit information, such as KSV 1870 and other places, stores correct and current data about you. You should also provide true information about your assets and income so that the bank can find it easier to assess your creditworthiness.
The better the credit rating, the lower the loan interest if you take out a credit-dependent loan. At the same time, however, it can also be the case that the bank does not give you any credit if it believes that you do not have sufficient creditworthiness. Therefore, make sure that you provide truthful information about your assets and income and that the various credit reports have not stored any false data about you.