Banks attract loans of all kinds with interest at almost no cost. Never before have loans for real estate financing, car purchases or consumer credit been so favorable as in recent years. Since it seems logical for many consumers that the disposition credit is provided on more favorable terms. Without much thought, its fast and convenient availability is eagerly used. What can be quite practical for a short-term, small-size bridging becomes a problem at the latest with a higher and long-term overdraft.
Debt credit remains expensive
Why is the repayment credit not spent at the same low interest rate as an installment loan ? Because banks do not link interest rates to the European Central Bank’s key interest rates, as they do in the case of mortgages or personal loans. Instead, they use the Euribor interest rate to calculate the interest on the credit line. With a term of 3 months this is currently (as of 10/2018) about 0.3%.
What is the Euribor interest rate?
The Euro Interbank Offered Rate was introduced with the currency change from DM to Euro. This is the average interest rate that banks charge each other when they issue loans to each other. The interest rate is subject to the relationship between supply and demand and is set by the European banks themselves.
Money trading independent of the central banks
Thanks to Euribor, banking institutions are independent of the national central banks that they relied on during the financial crisis. In the meantime the money trade between the banking institutes is flourishing again. That is why banks are no longer bound by the interest rate of the ECB in providing discretionary loans to their private customers. So they are not obliged to pass on a low interest rate to their customers, but can orient themselves at the fixed interest rate. The victim is the private borrower.
Dispo remains expensive, installment loan is the better alternative
It therefore becomes clear why the credit line is still an expensive affair for consumers. An interest rate in the double-digit range is still commonplace. In addition to being tied to a reference rate designed by agreement of all European banks, lenders also like to refer to the high administrative burden. He was higher on a discretionary loan than on an installment loan.
What can the consumer do to avoid high interest rates?
1. Those who only have to cover a small sum for a short time and can compensate for this with the receipt of the next salary can cope with the high interest rates at the dispo.
Second If a quick settlement of the utilized credit line due to lack of funds or amount of credit is not foreseeable, one should take the higher effort in and take a installment loan.
Third In order not to accidentally slip into the credit line, you should turn off the possibility of overdraft or disable. For some banks, this is done via online banking itself, for others it must be requested in writing.
4th If necessary, a change of bank may be worthwhile. When comparing you should pay attention to how high the interest on a discretionary credit.
5th Anyone who is already in the dispo and despite regular salary income does not manage to stay in the plus, should think about a replacement of the disposition credit through a private installment loan to lower interest rates.
With a few measures, you can escape the interest trap Dispokredit. Of course, an application for installment credit means more effort, but financially worth it. For in the case of personal loans, banks must orient themselves to the reference interest rate of the ECB. In addition, there are various offers with a fixed interest rate over the entire term and as a consumer you are not tied to the house bank.