After the ECB’s latest key interest rate cut, interest rates on installment loans have fallen to their lowest level since April 2023. Is a loan worth it now?
After the key interest rate cut by the European Central Bank (ECB), the interest rates on installment loans are also falling. While interest rates in the first half of September were around the same level as the previous month at 6.82 percent, they then fell to 6.67 percent. This is the lowest level in around a year and a half. This is shown by a current analysis by the comparison portal Verivox.
Consumers with average creditworthiness were able to take out installment loans from Verivox at an interest rate of 6.67 percent in the second half of September. According to the analysis, this is the lowest value since April 2023. In the first half of the month, the interest rate was 6.82 percent, similar to 6.86 percent in August.
“In a long-term comparison, we are still in a high-interest phase,” says financial expert and Verivox boss Oliver Maier. “The first key interest rate cut in the summer had already brought short-term relief. After that, interest rates settled back down to their previous level in the range between 6.8 and 6.9 percent.”
The European Central Bank’s (ECB) recent decision in September has raised hopes that interest rates could fall sustainably. Specifically, the deposit interest rate relevant to savings interest was reduced by 0.25 percentage points. The main refinancing rate, at which banks can borrow money from the central bank, moved closer to the deposit rate and fell by 0.6 percent – the second largest rate cut since the monetary union was founded.
“Due to a lack of experience, it is difficult to predict what consequences the new adjustment of the key interest rates will have for borrowers,” says Maier. “But if credit institutions can obtain money from the central bank at lower interest rates, they gain scope to offer their customers more favorable conditions when granting installment loans.”
When consumers plan larger purchases or investments and want to finance them with a loan, the question arises as to when is the right time. According to Maier, it is not a sensible option to continue to delay taking out a loan.
Interest rates are only likely to fall gradually and therefore rather slowly. If you follow a few important savings tips when taking out a loan, you can reduce your financing costs more effectively than if you wait for interest rates to fall, says Maier.
According to current figures from the Bundesbank, installment borrowers currently pay a nationwide average of 8.33 percent interest. If you carefully compare the loan offers from different providers, you can save up to 1,000 euros in interest on an installment loan of 20,000 euros with a term of six years.
Methodology: All loan agreements with Verivox were included in the evaluation. The median interest rate is evaluated because it is representative of borrowers with average creditworthiness. Half of all customers received their loan at this interest rate or cheaper, the other half pay higher interest rates. The evaluation period for the first half of September extended from September 1st to 14th; for the second half of the month, the period from September 15th to 27th inclusive was evaluated.
