Non-credit personal loan
April 15, 2019
Without credit rating, a credit-independent personal loan is not available. For whom and against which background is the decision for a credit-independent loan offer worthwhile? Who benefits from credit-based loans and when is a hybrid worthwhile?
Credit-independent personal loan – what is it?
A credit independent personal loan is a fixed rate loan that is not given as a business loan. The personal credit rating does not affect the interest rates for these loan offers. Only the applicant checks whether the applicant is qualified for the loan offer. The counterpart to these offers can always be found at the top of all credit search engines. It is the credit-based loan at the variable interest rate.
The restriction “personal loan” does not only refer to the exclusion of corporate loans. Most lenders also do not accept freelancers for lending. Only employees earning their income qualify for this loan offer.
Interesting is the credit rating-independent loan for the majority of all borrowers. Only those who have an exceptionally good credit rating, for which credit-related credit offers can bring an interest savings. Creditworthiness is usually rated as exceptionally good only for special occupational groups or for a high income.
Examples include civil servants or other civil servants. In the private sector, senior executives could be eligible for exceptionally low interest rates.
Fixed rate versus variable interest rate
A credit-independent personal loan is a fixed-interest offer. The offered interest rate applies to every accepted applicant and within the entire term. A variable interest rate always depends on the prevailing interest rates. If the base rate rises, so do the lending rates. If the key interest rate falls, the interest burden is reduced. The interest fluctuation risk in this case is borne by the borrower. For this reason, variable interest rates are usually much cheaper.
Worthwhile is the risk of small loan sums and short maturities. The likelihood of policy rates rising exorbitantly is low within a short period of time. Should it happen, then the effective additional costs for a small loan amount are quite overgrown.
Fixed interest rates are always important when it comes to the repayment security for larger loan amounts and long-term repayment periods. With the fixed interest rate, the lender bears the interest fluctuation risk. Therefore, fixed interest rates are always more expensive than variable interest rates. The extra investment in collateral is likely to pay off over a long term. Nobody should rely on permanently historically low prime rates, as at the moment.
If you have good or bad credit, use fixed interest rates
Not yet addressed was the mixed form of the two aforementioned loan offers. A credit-related loan can also be issued at a fixed rate. It offers the optimal solution for the long-term loan with good creditworthiness.
The offer can also be the alternative if a credit-independent personal loan is not viable because of a poorer creditworthiness. Although the cheaper interest rate is lost depending on the credit rating, at least the fixed interest rate guarantee is maintained.