Why do banks grant loans with negative interest?

Some institutes have been granting a loan with negative interest since 2017. These are loans in which the borrower has to pay back less money than was borrowed. At first glance, this is an action that is profitable for the customer. Nevertheless, financial experts warn against hasty decisions.


Negative Interest Loan – What Is It?

interest Loan - What Is It?

This online loan is characterized by the fact that the borrower has to repay a smaller amount than he has taken out. The bank “gives away” money, so to speak. The rate of interest is set by the respective institute. Since there is now competitive pressure in the area of ​​credit with negative interest rates, some providers even set the annual percentage rate at minus three percent. But not every customer receives a loan with negative interest. You have to give your data to the bank in advance so that it can take a look at your creditworthiness.


These conditions apply to a loan with negative interest

apply to a loan with negative interest

In order for a customer to qualify for a loan with negative interest, the customer must have a good credit rating – a negative entry by credit bureau will immediately exclude you from a loan with negative interest. The banks are therefore thoroughly checking the potential borrower. Furthermore, the sum is currently limited to 1,000 dollars at all institutes. Time is an important factor when it comes to negative interest rate loans. The offers at most banks only have a term of a few months – if you are interested in a loan with negative interest rates, you have to act quickly.

In addition, a loan with negative interest per person may only be granted once – it is unfortunately not possible to build up an additional income with this type of loan. If you have already applied for a loan with negative interest, you will have to forego this service in the future. You should therefore consider carefully whether you do not want to save the “privilege” for a later date. However, many potential customers still ask themselves why banks give loans that are at first glance a loss for them. In short, a loan with negative interest is an enticing offer that the institute wants to use to attract long-term customers.


Great demand for loans with negative interest

Great demand for loans with negative interest

Due to the advantageous conditions, the loan with negative interest is very popular. In 2017, interested people had the opportunity to take out a loan with negative interest rates for the first time. At that time, a loan was taken out with an interest rate of -0.4 percent. According to press reports, the campaign was very well received by customers. At that time, the number of loans requested was in the four-digit range. From this point of view, it is not surprising that the action was repeated in 2018. But even if the offer looks unselfish at first glance, there is also a certain risk involved.


Criticism comes from experts

Both financial experts and consumer protection warn against the action. There is criticism above all with regard to data protection – because according to specialists, banks want to get the contact details of borrowers and use them later for advertising purposes. Furthermore, not only the employees of the bank in question, but also other companies that are connected to the address memory, receive the sometimes very extensive data. Complaints occurred as early as 2017. Advertisements were sent to potential borrowers, even though they were not granted the negative interest rate at all. When considering a negative interest rate loan, you should be aware that you are exposing a lot of yourself.


Don’t let it push

In addition, despite short-term campaigns, potential customers should not allow themselves to be pushed and inform themselves precisely about the loan with negative interest. After all, it should be borne in mind that the loan will have to be repaid later on time. In addition, every loan is recorded in the credit bureau – if you are in arrears with the remittance of the loaned amount, you risk a negative credit bureau entry here. If you still 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.

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