At regular intervals banks advertise consumer loans,
Which are paid out to every customer with sufficient credit for the same interest rate. This procedure contrasts with the usual procurement practice, where the creditworthiness of the borrower, measured by his financial and personal circumstances and the scores obtained by statistical methods from the credit bureau, determines the level of the borrowing rate,
fixed-rate payday loans are therefore of particular interest to those customers who, due to their poor creditworthiness, have to accept high costs for a loan. As a consequence, this circumstance leads to a higher default risk for the bank, which awards such loans. As a result, the flat-rate interest rate is comparatively high.
Borrowers are required to pay
Currently, as of July 2008, borrowers are required to pay approximately nine percent APR for lump-sum loans. For credit seekers with good credit ratings, there are currently opportunities to obtain liquid funds for around six percent a significant difference accordingly.
Fixed-rate credits are usually granted as part of certain special promotions of the financing credit institutions. Often the actions are under a certain content motto and are distributed relatively aggressively. This is advertised in the context of sporting events or other special circumstances, often with the participation of prominent advertising promoters. The reason for this approach of the banks should lie in the attempt to suggest changes in lending conditions to interested parties.
Significant number of fixed-price borrowers are doing well
It may be doubted that a significant number of fixed-price borrowers are doing well. On the contrary, it can be assumed that the banks will refuse payment to those customers whose creditors would, according to the other procurement directives applied, obtain a higher interest rate than the latter. Customers whose credit would allow a lower interest rate would therefore pay a higher price than necessary; for customers paying a lending rate identical to the interest rate on the other credit market, there is no difference.
Through targeted advertising and fixed interest rates, banks use their customers’ doubts about their own creditworthiness. The special measures suggesting a reduced significance of the creditworthiness of the loan approval, the credit institutes specifically target those clientele who consider themselves less well off creditworthiness than is actually the case is. The customer group considers the fixed interest rate as favorable – the bank does its business.
Customers are well advised to determine the individually expected debit interest by receiving a condition request from another bank and then comparing it with the interest of the special offer before taking out a fixed-price loan.