Due to rising interest rates, financing has become considerably more expensive over the past twelve months. The current installment loan interest rates are a good 2 percentage points above the market average and even almost 3 percentage points above the previous year in the low-cost market segment. This is the result of a current interest rate analysis by the comparison portal Verivox. Due to the rise in interest rates, the total costs for a typical Credit in the amount of 15,000 euros with a term of 5 years, a good 1,100 euros more than a year ago.
Rate hike of nearly 3 percentage points on loan deals
In June 2022, installment loan interest rates were still 6.10 percent on the market average and have increased by more than 2 percentage points over the past year to currently 8.16 percent. In the course of the loan comparison, consumers direct their financing request to up to 23 banks at once. From all the offers received, they then select a suitable one for their loan conclusion. Because they usually opt for an offer with particularly low interest rates, the loan agreements represent the cheap market segment. With an increase of almost 3 percentage points from 3.79 to currently 6.60 percent, the rise in interest rates here is even higher than the market average.
The median interest rate was evaluated for the loan agreements because it is representative of a wide range of customer groups. Half of all Verivox customers conclude their loan at this or a lower interest rate.
“In the case of installment loans, the turnaround in interest rates began at the beginning of 2022. Thereafter, interest rates rose on a historic scale throughout the year. Interest rates for loans roughly doubled over the course of the year,” says Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH . Interest rates have stabilized somewhat recently. Loans are currently even a little cheaper than in May.
More than 1,100 euros in costs for a typical installment loan
In a year-on-year comparison, however, the increase is still significant. A model calculation shows how much the higher interest rates affect the financing costs: At the current interest rate level, an average borrower pays for one installment loan over 15,000 euros with a term of 5 years over the full term a total of 2,571 euros in interest. A year ago, the interest costs for the same loan would have been 1,107 euros lower.
Save more than 600 euros with a loan comparison
“Especially in times of rising interest rates, a thorough comparison of providers is essential so that the costs don’t get out of hand,” says Oliver Maier. Another calculation example shows how much this pays off: If you take out a loan of 15,000 euros at the market-wide average interest rate of currently 8.16 percent and repay it over a period of 5 years, you will pay a total of 3,193 euros in interest. Interested parties who compare offers before completing the loan receive their loan at an average interest rate of 6.60 percent – and have to pay a total of 622 euros less interest under these conditions.
Overdraft facility rescheduling saves 285 euros
Despite rising interest rates, the installment loan is often the cheaper option compared to other financing options. In particular, those who are permanently in the red with their account should have a rescheduling contemplate. Because the overdraft interest has also risen significantly in recent months – according to a recent survey by Stiftung Warentest from 9.43 percent last year to currently 11.22 percent.
Half of Verivox customers take out an installment loan at an interest rate of 6.60 percent or better. If you reschedule an overdraft facility of 4,000 euros under these conditions, you will pay a total of 407 euros in interest for a 3-year loan term. Repaying the same amount in the same period at the average interest rate would be 285 euros more expensive.
“A credit line is only intended for short-term bridging of a financial slump,” says Oliver Maier. “Anyone who is in the red with their account for a longer period of time should look for cheaper alternatives.” Even with the overdraft facility, consumers should not simply accept the first loan offer from their own house bank. Otherwise, they usually do not fully exploit the possible savings potential. For a rescheduling loan at an average market interest rate of 8.16 percent, the interest costs would be almost 100 euros higher than for an overdraft facility at the average interest rate of the Verivox loan agreements.