• Installment loans typically offer terms ranging from 12 to 120 months and loan amounts of up to €75,000.
• There are specialized loan programs for specific financing needs, such as home renovations or car purchases.
• To qualify for an installment loan, applicants must generally be of legal age, have a residence in Germany, and hold a German bank account. Loan approval also depends on creditworthiness—better credit can result in lower interest rates.
• Take your time when choosing an installment loan, ensuring that the loan amount and term align with your financial situation. Avoid borrowing more than necessary for your intended purchase.

• Freedom to use the funds as needed

• Competitive and fair fixed terms

• Loan amounts up to €75,000

• Flexible repayment terms up to 120 months

• Option to repay the loan early at any time

Most loans can essentially be referred to as installment loans or installment credit. The term simply means that a specific loan amount is disbursed and the money is then repaid with interest over a predetermined period of time.

The disbursement of the installment loan takes place once all necessary documents from the borrower have been received by the bank, reviewed, and a loan approval has been granted. Depending on the lender, disbursement of the installment loan within a few days is realistic. 

For example, refinancing existing debts with a lower-interest loan is also possible.

The costs of a loan include the interest that must be paid monthly, as well as any additional fees that may arise during the loan term—for example, for special repayment options. However, there are also lenders who offer free special repayments. 

The installments of the loan consist of interest and principal payments on the borrowed amount. The monthly installment to be paid for an installment loan depends on the chosen loan term.

For a loan of €20,000 with a term of 60 months, an effective annual interest rate of 3.69%, and a nominal interest rate of 3.63%, the customer would pay monthly installments of €364.99. This results in a total repayment amount of €21,899.50.

A repayment schedule for an installment loan helps keep track of current and future payments. It shows, for example, the remaining loan balance for each month.

Banks refer to special repayments when payments exceed the agreed monthly installment—meaning more money is paid back to the bank than the regular monthly amount. 

The option for special repayments can be included in the loan agreement.

To receive only reputable offers for installment loans, speak to your MLP advisor. They can provide a verified loan offer tailored to your specific financing needs and take your preferences regarding term, installments, and interest rates into account.

A residual debt insurance (loan protection insurance) can make the loan more expensive. This type of insurance is intended to protect the borrower in the event of unemployment, accident, or death. 

You should carefully weigh the costs against the benefits and consider how high the risk of unexpected unemployment really is. Often, such risks are already covered by other insurance policies.

There are a number of standard requirements that a borrower must meet in order to qualify for a loan: 

• The applicant must be of legal age
• The applicant must have a registered residence in Germany
• The applicant must have a German bank account 

There are several important factors you should pay close attention to as a borrower before requesting an offer for an installment loan. Although a loan is only granted if the bank considers the customer creditworthy, you should also assess your own financial situation to determine whether an installment loan is truly the right choice for you.

1. Don’t overlook existing financial obligations when taking out an installment loan

 Is your credit rating already strained due to an existing loan or because you've been using your overdraft facility over an extended period? Be sure to get a clear overview of your current debts before applying for a new installment loan.

In particular, switching from an overdraft to an installment loan can often be more cost-effective. However, it's important to carefully review the loan terms, and seeking professional advice is highly recommended.

2. How stable is your personal financial situation?

 Of course, unexpected events can always happen, but to some extent, you can assess your own financial stability when considering an installment loan.

For example, if you have a fixed-term employment contract, you should avoid taking out a loan with a term that exceeds the duration of your contract.

3. What is the purpose of the installment loan?
Even if you’re not required to state a purpose when taking out an installment loan, it’s still wise to think carefully about how you plan to use the money.

A common tip from financial experts is to only take out loans that are planned and thoughtfully considered. Zero-percent financing offers in stores, for example, can lead to impulsive decisions that you may regret later.

4. Early repayment penalty for an installment loan
If you want to repay your loan before the end of its term, the bank is often entitled to an early repayment penalty. For standard installment loans, the amount of this penalty is legally limited to a maximum of one percent of the remaining loan balance.

Installment loan: What loan term should I choose?

In addition to the general terms, the loan term determines the amount of the monthly installments. What should you base your decision on when choosing the loan term?

Loan term not longer than necessary
The longer the loan term, the harder it becomes to assess financial stability. Whether you will have the same job in 10 years is impossible to predict. Therefore, choose the shortest loan term possible.

Installment loan: Loan term depending on the purpose
The idea is to avoid burdening yourself with a purchase that will be in the past. A simple example for the loan term would be a vacation. The loan term should ideally end soon after the trip is over.

For technical devices, estimate the expected usage time or stick to the warranty period.