Month: March 2020

Tips for choosing the best Mortgage Credit

There is a lot of publicity we receive daily about how to face our mortgage, but how do we know if we choose the most correct option? The one that best suits our pockets and possibilities ?. Above all, we must think that the decision we make will accompany us for at least 20 years in the best cases, so it is worth stopping to think about it.

The most valuable advice for these cases is to seek information from various bank sources and not limit ourselves to our lifelong bank. The offer in the market is very wide, but sometimes it can play tricks on us if we do not carefully read the fine print of each offer.

 

When we refer to Mortgage Credits ..

When we refer to Mortgage Credits ..

It is not enough to look only at the dividend or what will have to be paid every month. The final cost of a loan is also built on interest, fire and credit insurance, in addition to various additional expenses. And let’s not talk about the amount of voluntary insurance that exists in the market and that can be added to credit. Numerous studies have shown that all these additions can make up half of the mortgage credit that we are hiring.

In Mortgage Credits, it is also essential to look at the interest rate, if it is variable, fixed or mixed during the credit period. It is important to know that the grace or non-payment months are not free and therefore will accrue interest. We must not forget that we do the mortgage for many years, so it is highly recommended not to get carried away by initial offers or succulent gifts.

 

A good tip

mortgage credit

A good tip that will probably help them make the decision to choose a mortgage loan in a simpler way is the advisors of the banks, specialized in the matter, at the service of the clients to inform about the totality of the product that they are offering for what we do not forget to count on them for the resolution of doubts or concerns that may arise.

In Lenders Bank you can simulate your Mortgage Credit and choose the most convenient one. Enter our Mortgage Credit Simulator and start saving.

Bank credit: online with favorable conditions

Good Finance Bank is one of the few remaining major banks in Germany. It was founded in 1870. The head office is in Frankfurt / Main. The bank operates internationally with branches in major stock exchanges such as New York, London, Singapore, and Sydney.

All financial services of a universal bank with a focus on investment banking are offered. E-Bank, which has been a subsidiary of Good Finance Bank since 2006, is particularly specialized in private customer business.

It is interesting to divide the banking offer by customer groups: private customers, wealthy customers, business customers, corporate customers and customers from the public sector.

Good Finance Bank is not making good headlines

Good Finance Bank is not making good headlines

She recently failed the second part of a stress test by the FED, the American central bank, because she has neither the necessary internal controls nor effective risk management for a simulated emergency.

The Fed spoke of “widespread, significant shortcomings” in capital planning. The bank is expected to be able to correct the criticized organizational deficiencies. Regardless of the problems the bank is currently facing, we want to deal with the question of how to assess the bank’s loan offering.

Good Finance Bank is a branch bank, some of whose banking products can be concluded online. For example, account openings and credit card applications are possible online as well as applications for personal loans.

A visit to the branch is required for other financial services.

The bank makes it possible to make appointments via the website, to obtain information on the individual banking products and to prepare the conversation with the clerk, among other things with the help of financing computers.

We want to take a closer look at the product page for Good Credit

We want to take a closer look at the product page for Good Credit

Customers are offered two options: the loan can be applied online or the customer can request an appointment with personal advice at a branch close to where they live. The necessary tools are available to make an appointment. It is also possible to contact us by email. Customers can receive the answer by email or have them call them back.

Links to both options are clearly visible above the break. If the customer clicks on “Apply online”, they will be forwarded directly to the credit request. It is better to first scroll down and find out about the conditions in detail. Various links lead to information about the loan terms, the application process and a detailed FAQ area.

If you make the effort to click on all tabs, you will receive all the essential information about the loan offer in a clearly arranged manner. Customers can also use the Good Finance Bank loan calculator to estimate the monthly debits of the desired personal loan.

It should be emphasized positively that the loan calculator does not assume the cheapest effective interest rate, but the interest rate in the two-thirds example. This gives customers a relatively realistic estimate.

The layout of the product page is limited to the essentials and is not, as with some other websites, overloaded. Clear navigation prompts customers to obtain comprehensive information about the loan offer.

The information is presented fairly and understandably. Nowhere does the impression arise that customers are urged to take out a loan.

The loan offer from Good Finance Bank

The loan offer from Good Finance Bank

Apart from credit cards, personal loans can be taken out online alone. For all other credit products, an appointment with a branch is required.

In addition to consumer credit, the bank offers a private loan for university graduates, a student loan and practically all possible forms of real estate financing. The private loan for university graduates can also be used to refinance services.

Loan amounts of up to USD 50,000 are possible with terms of up to 120 months. The interest rate depends on creditworthiness.

Proof of income for loans: What banks want to see

Whether on the Internet or at a branch bank, every loan application must be accompanied by documents on the applicant’s income and, if applicable, assets.

Proof of income from lending serves two main purposes:

With their help, possible loan collateral should be determined. And – more importantly – proof of income serves as evidence of the extent of economic resilience.

Credit scores from the various credit bureaus (Credit bureau and others) are used to estimate the reliability with which a credit customer will meet its obligations.

Proof of income, on the other hand, shows whether a borrower is financially able to service a loan of a certain amount, with a certain term and with a certain effective annual interest rate.

Banks use both elements of the credit check to create an individual score that is compared with the lending guidelines.

If the internal bank score is sufficient according to the lending guidelines, the loan customer receives the loan applied for. In the opposite case, the loan is rejected.

Submitting comprehensive, meaningful proof of income together with the loan application is therefore of crucial importance for lending.

During the loan application process, banks state which proof of income is required for lending. It is important not to forget any type of income in the credit request and to prove each type of income.

Proof of income from employment

Proof of income from employment

Employees, including civil servants, are asked to provide copies of their payslips.

Most banks are content with payslips for the past two or three months. In addition, banks often expect copies of ongoing bank statements.

The period is different. It is often the past four weeks. Sometimes even the bank statements of the past few months are requested.

Other banks do without bank statements.

Banks that issue fully digitized loans, on the other hand, forego pay slips and only use bank statements as part of a so-called account view to check creditworthiness.

To do this, the applicant must provide the credit bank with the access data to his checking account via a secure connection.

However, special certificates of earnings are rarely requested.

If this happens, the borrower must contact his employer. The employer is obliged to issue such certificates of earnings.

Pay slips, bank statements and, where applicable, proof of earnings serve once as proof of the amount of current income and that of an employment relationship.

On the other hand, banks get insight into incoming and outgoing payments. Finally, banks can see whether there are attachments or assignments.

However, employment contracts to prove the existence of an employment relationship are only very rarely required.

Hardly any additional information can be derived from employment contracts. In particular, the actual earnings cannot be derived from the content of the employment contracts. Allowances, other salary components and tax bracket are not part of employment contracts.

Banks require pensioners to receive the latest pension notices.

Officials are asked to provide copies of the latest salary notices when granting a loan.

Proof of income from a loan without Credit bureau

Proof of income from a loan without Credit bureau

Loans without Credit bureau are only granted to employees or civil servants.

Since the amount of the attachable income plays a special role with this type of credit because there is no Credit bureau information, strict requirements for the proof of income apply.

Sigma Bank from Liechtenstein is the only bank that grants loans without Credit bureau in Germany. Regardless of whether a loan application is made directly to the bank or through a credit intermediary, the following documents are required:

The last two original pay slips.

The original bank statements matching the pay slips or by uploading documents.

Account statements and wages received must be visible on the statements.

Proof of income for freelancers and traders

Proof of income for freelancers and traders

Borrowing means more work for the self-employed than for employees and civil servants.

While future monthly earnings for employees are relatively easy to predict, the self-employed often do not have regular monthly earnings.

Banks therefore need more material to be able to assess the financial resilience of the self-employed.

The idea behind it: The risk of credit default can only be limited by a precise analysis of the financial situation in the past and in the present. The more economically stable the company was over a longer period of time, the more likely it will be in the future.

That is why banks often require a mountain of documents. Credit institutions are particularly thorough with traders because this professional group tends to assume a weaker credit rating.

Self-employed applicants must demonstrate independence for several years. Two to five years are usual, sometimes even seven years are required.

Proof of social benefits

Proof of social benefits

Beneficiaries of social benefits alone do not receive loans. However, some banks still allow a loan application if a solvent co-signer is made who has income from self-employed or dependent work.

If several people apply for a loan, each person must provide proof of income for themselves. If an applicant receives state benefits, nothing else applies.

Anyone who receives unemployment benefit, sickness benefit, parental benefit or other social benefits should therefore provide the relevant evidence (notices).

Proof of other income

Proof of other income

Occasionally, loan applications are rejected because applicants have forgotten to report additional income.

Income does not have to come exclusively from self-employment or employment.

Relevant income also includes, for example, income from renting and leasing, interest income from investments or income from self-employed or dependent employment.

Getting child benefit can also play a role in lending.

Additional sources of income as well as the main income have to be proven.

This is done, for example, by submitting notices, custody account statements, account statements with the corresponding incoming payments and rental or lease contracts.

Additional income from dependent work can be proven through pay slips.

Name collateral

Name collateral

Loan guarantees play a major role not only for the self-employed. They can also make borrowing easier for employees and pensioners.

Direct banks largely grant loans automatically, with little regard for special circumstances among individual borrowers.

Therefore, apart from salary assignments and co-signing of the loan agreement, no other collateral is often accepted.

However, the situation is different for branch banks. House banks are more willing to accept additional collateral to improve creditworthiness requirements.

However, not every asset comes into consideration. The house bank will also be very reserved when it comes to stamp collections, collections of modern art or antiques.

When it comes to collateral, two points are particularly important for banks:

The value of the asset must be easy to determine and it must be possible to realize it in the event of a loan default without difficulty.

The following are the main types of loan collateral: securities holdings, all kinds of savings, capital life insurance and private pension insurance, real estate and motor vehicles.

Credit-related interest rate vs. unit rate

It depends on the interest rate. Borrowers first look at the interest information on a loan offer. Rightly so, because the interest rate is a decisive indicator of how cheap a loan is for the consumer. But which interest rates are really meaningful?

There is information about whether the interest rate depends on the creditworthiness or whether the installment loan is granted at a standard interest rate.

Consumers very often find this information in a note marked with an asterisk somewhere below in the credit offer. The borrowing rate is also differentiated from the effective interest rate, and finally, there are representative examples. Here it is explained which interest rates are important and which installment loans are actually consumer-friendly:

Loans with interest rates dependent on creditworthiness or with uniform interest rates independent of creditworthiness.

What does credit-related interest rate mean?

What does credit-related interest rate mean?

The bank’s interest offers are not only dependent on the amount of the loan and the term. They also depend largely on the individual creditworthiness of the customer.

Each credit check is carried out in two stages:

Firstly, by obtaining Credit Checker information or information from other credit agencies such as Good Credit.

This information contains two different pieces of information. First of all, the bank learns whether its customer has so far properly fulfilled all liabilities or whether there are negative Credit Checker entries. If there are no negative Credit Checker entries, a Credit Checker provides a score calculated according to certain standards.

The score measures the likelihood that the borrower will meet his loan obligations.

For this purpose, he is assigned to groups of people according to certain criteria. It is not the concrete reliability of the customer that is measured, but the abstract reliability of the group of people in which the customer is classified.

On the other hand, the bank measures the creditworthiness of its customers through its own surveys. This includes information about the civil status, the place of residence and above all about the income and financial situation.

The results of both exams are summarized in a kind of overall grade. How the bank evaluates individual components and how strictly the creditworthiness criteria are handled is practically treated as banking secrecy.

The criteria vary from bank to bank.

The bank uses the credit rating to assess the credit default risk.

The higher this risk, the more the bank’s earnings are questioned.

In order to reduce the risk and thus secure the profit or at least exclude losses, higher interest rates are used if the creditworthiness is poor.

In other words, customers with a good credit rating can expect low-interest rates.

With increasing creditworthiness cuts, interest rates continue to rise until the credit rating is no longer sufficient in the bank’s opinion for lending.

Unit rates

If the bank offers uniform interest rates independent of creditworthiness, all customers pay the same interest for a loan with the same term and the same loan amount.

However, there is a limit credit rating, below which no loans are granted at all.

A simplified example should clarify this: The bank assesses the creditworthiness based solely on the information about the bank score.

According to their guidelines, loans should only be granted up to a score of level D, which means a default risk of 3.13%.

All customers receive the same interest rate, even if they have an A rating. Customers with a rating level lower than D do not receive a loan.

Loans with standard interest rates are very often only given to customers with above-average or good credit ratings.

Other consumers do not enjoy the interest rates that at first glance seem cheap.

The stricter the marginal credit rating, the better the interest rates and the lower the chance for consumers to get a cheap loan with a single interest rate.

Some banks scale the uniform interest rates either by terms or by loan amounts, sometimes even according to both criteria.

The unit interest rates are then different and you can usually find them in an interesting table.

Credit-related or uniform interest rates: Which interest rate is cheaper?

Credit-related or uniform interest rates: Which interest rate is cheaper?

Standard interest rates that are independent of creditworthiness are often presented as particularly consumer-friendly. Consumer advice centers are sometimes of the same opinion.

In fact, unit interest rates are somewhat transparent. When making an application, customers do not know whether they are getting a loan at all.

But if the loan is granted, they know in advance what the interest rate will be.

If loans with interest rates dependent on creditworthiness are offered, the customer initially remains unclear about the actual conditions.

Only when there is a concrete loan offer does he know how high the interest is. For this reason, interest rates dependent on creditworthiness appear less transparent.

It is also difficult to compare such loans in advance.

Additional opacity arises from playing with interest rates. Loan providers advertise with a minimum interest rate and a maximum interest rate.

So-called, but worthless, credit calculators are often offered, with the help of which customers can estimate the monthly installments. These loan calculators usually always use the minimum interest rate.

The minimum interest rates are unrealistic. A maximum of 5% of customers with the very best creditworthiness can hope to receive a loan at the minimum interest rate. Anyone who hopes for such input interest rates will be regularly disappointed.

Flat rates are problematic in another way. The credit default risk is a cost factor that must be taken into account when calculating the right interest rate.

If banks offer loans at standard interest rates, they do a kind of mixed calculation. The result is that customers with very good credit ratings have to pay higher interest rates than would be appropriate given their credit rating.

These customer groups are therefore disadvantaged.

As a rule, only customers with poor creditworthiness benefit, but whose creditworthiness is still sufficient for lending.

This is often the customer group with the worst possible creditworthiness.

Some banks also use the standard interest rate as a lure for loans with higher, then credit-dependent, interest.

Although an applicant does not have the required creditworthiness for the unit interest rate, he still receives a loan offer from the bank, but with higher interest rates.

If you weigh the advantages and disadvantages of both types of interest against each other, they are actually in balance.

Real loan comparison is only possible on the basis of specific loan offers. This is the only way that borrowers with loans with a single interest rate can determine whether they have a credit opportunity at all.

In the case of loans with interest rates dependent on creditworthiness, specific loan inquiries are also required to determine the actual effective interest rate.