When you apply for a loan, you can usually specify a purpose. This information may help you to get better credit terms. The bank does not want to spy on you with an indication of the intended purpose, but the purpose can help to get better conditions.
Indication of a purpose of use is not required
You are not required to specify the purpose in the loan application. Basically, you are free to apply for a so-called consumer credit without giving the bank information about what you want to use the money for. Once the loan application has been received, the bank will review your credit rating based on factors such as your monthly income, possible collateral and your credit score. If you already have a good credit rating, you will easily get your credit – even on particularly favorable terms. If your financial situation is less good, it can be more difficult.
When does it make sense to specify the purpose?
In the case of a less good credit rating, the indication of the purpose of use can certainly be beneficial. But what matters is what the loan should be used for. If the bank considers the risk of loss due to poor creditworthiness and lack of collateral very high, it will hardly grant credit for a Black Water Bay cruise. On the other hand, if you want to finance a new car with the money you have raised, the vehicle itself can serve as collateral that ultimately convinces the lender to grant you a loan.
Typical examples in which the intended use can lead to better credit conditions are financing for your own home or its refurbishment , vehicles or rescheduling. The former two create new values in return for the loan, which serve as security for the lender. With rescheduling the case looks different: Here it comes not to new possessions, but also not to new debts. Finally, the debt rescheduling loan is only raised to replace existing loans. This, too, can already positively change the basic conditions of your loan.
Example car purchase
A dedicated loan can be well worth it if you want to buy a new car. Of course, you can also apply for financing through the car bank of the dealership. These loans are often not very flexible and only cover the purchase price. If you want to add a small amount in addition, for example, to buy winter tires and a roof luggage box, that is not possible with the Autobank. However, with a regular bank, you can. In addition, you can act as a bar buyer to the car dealer, which gives you additional benefits in the price negotiations. For example, you can negotiate discounts on the purchase price or additional equipment, and in the end, you might even save twice – on the car and the loan.