Installment credit regardless of credit rating should not be understood to mean that anyone can get this installment loan, regardless of their credit rating. The only thing is that, provided that the creditworthiness is given, everyone gets the loan on the same terms. That means that the teacher Mr. Meier pays 5.9% interest for 10,000 USD with a 48-month term as the baker Mr. Tanz. In contrast to installment loans with interest rates dependent on creditworthiness, personal creditworthiness is irrelevant. The creditworthy student is treated in the same way as the creditworthy doctor.
If the installment loan is independent of creditworthiness, this has advantages for borrowers
In the first place, credit-independent installment loans have the advantage that they can be compared better from the start using the loan comparison. The potential borrower knows at a glance how high the interest is and can calculate for himself what the loan will cost him. The situation is completely different for installment loans with interest rates dependent on creditworthiness.
Here is advertised with an interest rate that is optically optimal, but which is almost certainly not granted to any customer. If a potential borrower wants to know which specific interest rate is suitable for him, he has to get a personal offer. If that is the case, there is usually the awakening because there can be worlds between advertised interest and offered interest.
The installment loan with fixed interest is on the rise
The new consumer credit directive has been in place since June 2010, forcing banks to back up the advertised interest rate with a representative example. Using the example, which must be chosen so that it applies to two thirds of the borrowers, consumers can quickly see the distance between interest advertising and reality. Some banks, such as Agree bank, have subsequently switched back to granting the installment loan with interest independent of creditworthiness.