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The interest rates on the installment loan are so extreme

The financing costs are therefore higher for Otto. The installment loan for the purchase of 2,500 euros has a total interest cost of 390 euros, at an interest rate of 15.31 percent. Otto customers pay 15.2% interest on four-year installment financing. With a value of the goods of 5,000 euros, this entails additional costs for a total of 1,587 euros.

Financing costs are slightly lower for the other resellers in the sample. Media Markt and Saturn online store customers pay 8.49 percent interest for both financing models. For a purchase of 5,000 euros, this entails additional costs for a total of 879 euros; for the installment financing of a purchase with a value of goods of 2,500 euros, the interest expense amounts to 218 euros.

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Amazon customers can finance the same amount at an interest rate of 7.69% and would pay a total of € 198 in interest over two years. For the $ 5,000 purchase, however, they would have to switch to another payment option. Amazon only offers installment financing for purchases up to 3,000 euros.

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Bank credit up to € 1,353 less

“Although installment financing directly via the reseller is convenient for customers, it is often very expensive and inflexible,” says Oliver Maier, managing director of Verivox Finanzvergleich GmbH. “In particular, consumers can finance the needs of larger consumers much cheaper with a retailer-independent bank loan.”

The economic banks grant an installment loan of 5,000 euros with a duration of four years at a fixed rate of 2.28 per cent, regardless of creditworthiness. Under these conditions, borrowers pay interest of € 234 for the entire term – € 1,353 less than the more expensive dealer financing.

Combine the small installment loan into a single loan

However, an installment loan is not an option for every loan application. “Most banks don’t lend less than € 1,000,” says Maier. If consumers want to pay in installments for small purchases, buying in installments through the retailer may be a suitable solution. However, if you pay multiple financing installments at the same time, you can quickly lose track.

“As soon as the sum of all current liabilities exceeds the € 1,000 threshold, consumers should check whether it is worthwhile for them to restructure their debt with an installment loan,” advises Maier. “In most cases, a lot of interest is saved and in the future only a monthly payment will be charged to the account.”

Fast loan disbursement through completely digital processes

Even bargain hunters in a hurry don’t have to do without a dealer-independent loan. “Many banks allow you to apply for and complete the loan online. It often takes 24 to 48 hours to pay,” says Maier.

When they take out a fully digital loan, customers identify themselves via video chat. Online signature replaces manual signature. Documents such as bank statements and payslips are uploaded via an online form. In some institutions, the credit check is already carried out fully automatically and in real time via the so-called digital account view. Borrowers therefore no longer have to submit any documents.

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