As in any other industry, the credit market is subject to continuous development and corresponding Trends. However, this does not only mean the development of interest rates as such, but also the way banks calculate interest rates. This refers first and foremost to the interest rates that customers have to pay for a loan. While some years ago it was still common to offer a fixed uniform interest rate for a loan with no credit check or bad credit, it looks different nowadays. Anyone who observes the credit market attentively notes that more and more credit offers with a credit-related interest rate are offered. A development which should be considered with concern. Not every Trend develops to the benefit of a consumer.
Two interest rate models to determine the market for loans
In particular, banks use two common interest rate models for the two most common loan offers – the installment loan and the car loan. On the one hand, there is the group of credit institutions, which estimates so-called non-credit interest rates. In this case, the same interest rate applies either to each customer or the amount of the loan interest is made dependent on the duration and amount of the loan the customer chooses. On the other hand, there is an ever-growing group of banks that opt for a credit-related interest rate on their credit offering. Here, it is essentially the creditworthiness of the customer, which is significantly involved in which credit interest is ultimately to be paid. Depending on the type of loan, if one looks at Credit-related and non-credit-related interest in the total, then there are three to four influencing factors that affect the amount of interest to be paid.
1 Amount of the loan
3 The credit rating of the customer
4 Any collateral
Credit-related interest rate: benefits for the credit customer? No one!
Does the question arise, whether this Trend at the lending banks can actually be derived any advantage for the customer? Here, a clear “no” can be answered. Because basically, it would be only credit seekers with a very good credit rating who benefit from this System. However, since there is hardly anyone in Germany who has a TOP credit rating according to the criteria of the credit rating agencies, the best interest rate offered by banks would hardly be achievable. As a result, the Bank calculates a significant interest surcharge for customers with a mediocre or inferior credit rating. Another disadvantage is definitely that offers that include a credit-related interest rate can be compared very badly with other credit offers. Because a credit calculator does not work reliably at this point, because it is precisely not to be estimated to what extent the creditworthiness of the customer actually affects the interest rate.
Conclusion: the lending Bank benefits primarily from the credit-related interest, because this allows it to set a specific interest rate for each customer individually, without having to justify itself in Detail.…