Credit with negative interest – profit or risk?
Some institutions have been granting loans with negative interest rates since 2017. These are loans in which the borrower has to repay less money than was lent to him. At first sight, this is a profitable operation for the customer. Nevertheless, financial experts warn against rash decisions.
Credit with negative interest – what is that?
This online loan is characterised by the fact that the borrower has to repay a smaller sum than he has borrowed. The bank “gives away” money, so to speak. The interest rate is set by the respective bank. Since there is now competitive pressure in the area of loans with minus interest, some providers even set the effective annual interest rate at minus three percent. But not every customer receives a credit with negative interest. In advance you have to give your data to the bank so that they can take a look at your creditworthiness.
These conditions apply to a loan with negative interest
For a customer to be eligible for a loan with negative interest, he must have a good credit rating – a negative entry by Experian immediately excludes you from a loan with negative interest. So the banks check the potential borrower thoroughly. Furthermore, the sum is currently limited to 1,000 GBP at all institutions. Time is an important factor in the case of a loan with negative interest. For example, the offers at most banks only have a term of a few months – so anyone interested in a loan with negative interest must act quickly.
In addition, a loan with negative interest may only be granted once per person – unfortunately it is not possible to build up an additional income with this type of loan. So if you have already applied for a loan with negative interest, you will have to do without this service in the future. You should therefore consider carefully whether you want to save the “privilege” for a later date. However, many potential customers still ask themselves why banks grant loans in the first place, which at first glance seem to be a loss for them. In short, a loan with a negative interest rate is a tempting offer with which the institution wants to attract long-term customers.
Great demand for loans with negative interest rates
Due to the advantageous conditions, loans with negative interest rates are very popular. As early as 2017, interested persons had the opportunity to take out a loan with negative interest for the first time. At that time, a loan with an interest rate of -0.4 percent could be taken out. According to press reports, the campaign was very well received by customers. The number of loans requested at that time was in the four-digit range. From this point of view it is not surprising that the campaign was repeated in 2018. But even if the offer may seem unselfish at first glance, it also involves a certain risk.
Criticism comes from experts
Both financial experts and consumer protection agencies are warning against the action. There is criticism above all with regard to data protection – because according to experts, banks want to get the contact details of borrowers in this way and use them later for advertising purposes. Furthermore, not only the employees of the credit institution in question, but also other companies connected to the address memory will receive the data, some of which is very extensive. Complaints were already received in 2017. Potential borrowers were sent advertising even though they were not granted the minus interest in the first place. If you are considering a loan with negative interest, you should be aware that you are revealing a lot about yourself.
Don’t be rushed
Also, potential customers should not allow themselves to be pressured despite short-term actions and should inform themselves precisely about the credit with negative interest. After all, it is important to remember that the loan must be repaid on time later. In addition, every loan is noted in the Experian – if you are in default with regard to the return of the loaned amount, you risk a negative Experian entry here. If you nevertheless decide to take out a loan with negative interest, you should invest the money with a good interest rate. Then it is possible for you to make a profit with such a loan.
Is a loan with negative interest worthwhile?
In view of the amount borrowed, this type of loan is a small loan. It can therefore be worthwhile for people who are considering a smaller purchase, have a very good credit rating and need a financial injection. However, before you decide to take out this loan, you should make sure that you are able to repay the loaned amount within the specified period.