Since a loan taken out at a bank or an institution is always linked to the payment of interest, it can only be said in the narrow sense of a free loan if interest or other costs are eliminated. The basic idea behind lending money is to enable the borrower to remain financially viable by temporarily providing a certain amount of money. In return, the borrower pays interest on this service, which varies according to the duration of the loan agreement and the amount or other, more personal, conditions.
When is a free loan possible?
Thus, a free loan can only be designated as such if there is no interest or any costs beyond the loan amount for the borrower. This case, ie a waiver of interest, will probably only be given in cases where the borrower is in personal relationship with the lender.
For example, no expense is incurred when a relative agrees to provide a loan or loan for a period of time. In such a case of a free loan, as well as a loan for which interest has to be paid, usually a written agreement is made in which the terms of the loan and its repayment are determined.
Example free loan
To give an example of such a loan, the following case could serve to illustrate it: Grandson M., in order to be able to complete his studies in peace, so as to avoid having to work in addition to the exam preparation, needs one Total of 2,000 euros. This money, he hopes, has paid off quickly if he can complete his studies stringently and successfully without additional mental stress.
So he listens to relatives and finds in his grandmother a person who lends him this sum for a certain period of time – without asking for interest. It goes without saying that she does not simply give him the sum, but that she does not want to burden her grandson with the interest, too.
In the case mentioned, an agreement or an invoice could look like this: Both sides record the amount of the sum in writing. They agree on the exact modalities of the repayment, for example a payment of 5 x 400 euros every two months. They set the earliest time to repay, a time when grandson M. hopes to make his own money. The fact that the total amount also corresponds to the amount to be awarded is also recorded.
This makes it clear that the borrower does not incur any additional interest or other costs, so this loan is strictly free. This case, which is not so rare in practice, will be implemented according to the individual conditions of both sides. It can be transferred to other relationships, which are mostly based on personal relationships.
Credit from organizations
In some cases, organizations also grant free loans if the borrower has proven to be “in need of assistance” under the organization’s statutes. It is worthwhile, therefore, to listen to such possibilities before making use of a loan.
Consumers and consumers have the option to apply for a free loan from a bank or financial institution. This is an interest-free loan where the customer does not have to pay interest on the money. Interest is the effective rate that describes the total cost of a loan per year. Such a free loan is tied to a credit institution, limited in the maximum loan amount and has a fixed term.
For customers with an interest-free loan with a previous positive credit check the opportunity to get a quick cash injection without incurring costs.
Under what conditions possible?
The requirements that a client has to meet if he wants to have a free loan are now standardized for most banks and financial service providers.
An overview of the common requirements for the attractive loan:
- The applicant must have reached the age of 18, since in Germany he will only be considered legally competent from this age onwards and may sign legally binding contracts by hand.
- For a loan, which is completed within the FRG, the applicant must be resident in Germany, regardless of the terms or costs.
- The bank details used to disburse the loan must also be completed at a German bank. No German loans are currently being paid out to foreign accounts.
- The applicant must have permanent employment and be outside the probationary period. In addition, the employment relationship must be indefinite. In some cases, however, lenders offer to work at least for the duration of the agreed repayment term.
- As a rule, the money from an interest-free loan is used to cover everyday needs, ie consumer goods. Legislators refer to this loan as consumer credit for the purpose of consumer financing and provide appropriate proof of income. Some providers also require gap-free statements to determine that the ratio of incoming and outgoing payments allows the repayment of a loan.
- The applicant must contractually ensure that he trades on his own account, ie wants to use the consumer credit for himself and the costs resulting from this alone at his expense. The conclusion of a loan for a third person is excluded by contract.
- Private Credit information and so-called credit checks are also among the necessary conditions to quickly get free money on a consumer loan can. The applicant may not have negative information about Private Credit. The insight of the Private Credit indicates the degree of indebtedness and how the payment behavior is assessed. Each lender is allowed to reject a loan application if the Private Credit entry is negative.
What to look for when completing Free Credit?
As always with money matters, the consumer should read the details and obtain comprehensive information before entering into the loan agreement. A comparison of the known providers and of course the conversation with the house bank are also part of the preparation.
Not always the free loan is used for a purchase. Often, especially in the small loan amounts for so-called instant loans and financial bottlenecks are overcome or expensive disbursements in checking accounts avoided. Since it makes sense to read through exactly what each case means “free” and what information in the contract you should check carefully.
- The conclusion of a supposedly free loan with a mediator can possibly cause costs. If the lender does not act on his own, but uses a brokerage portal or service provider to attract customers for his loans, there may be a brokerage fee that is transferred to the end customer. So look up to the question: who is the lender and does he jump on?
- Some providers hide in the small print a so-called prepayment penalty, which is based on the repayment term and can usually account for up to 1% of the prepaid amount repaid. The earlier replacement or the payment of a higher rate than agreed, then leads to costs in the actually free loan.
- It is not uncommon to read in the contracts that in the event of early repayment, ie the early repayment of the outstanding loan amount, the usual interest is charged. This can mean that suddenly high loan interest rates can be expected and thus the free loan turns out to be a standard credit line.
- When choosing the providers and the credit comparison one should resort to reputable providers. Stay away from financial statements that require a processing fee to be paid when the contract is signed or when the loan is tied to other products.
- The purpose is important, because for some free loans, such as consumer credit, the legislature has already provided for more favorable conditions than for a loan used for the investment or purchase of shares. So always specify purpose, – most often it is the free instant loans to small sum, which are awarded as consumer credit.
- A truly free loan means that there will be no special repayments, further interest payments or prepayment penalties.
- If the applicant does not or only partly has the above conditions for the free loan, it is advisable to include a second borrower in the credit agreement. This increases the chances of granting the instant loan.
- When applying for consumer credit online, the information and comparison of conditions and conditions is particularly important.
- The loan application must be completed in full and truthfully. Incorrect information can lead to rejection, even incomplete information often leads to distrust and rejection.
Compare online loans before
Especially with the conclusion of the so-called instant loan, ie a free loan, in which shortly after the loan application and the successful examination of the conditions by the borrower, the loan amount is paid to the specified account, consumers should access the numerous online portals on the Internet. Here you will find not only many objective and above all neutral contributions and up-to-date information on the topic, but also experience reports of borrowers.
In addition, there are various comparison portals and reviews for free loans and consumer loans, with a quick overview of the various providers, their terms such as term, loan amount and special agreements list.
But also here the details of the contract conditions must be read, so that when applying for a black sheep in the industry is selected. With time and good preparation, a free loan, whether at a local service provider or bank, or through the online instant loan from a reputable provider, is a great way for consumers to get the sum they need quickly without the hassle of borrowing to be burdened with the money.