Difference in credit between direct bank and branch bank
There are clear differences between direct banks and branch banks in terms of lending rates, but also for the services available to loan seekers. This observation is hardly surprising, as consumers expect better interest rates from online banks and better advice when borrowing from a branch office. Indeed, differences in effective lending rates and service do not exist exclusively between the two groups of banks, but also between different direct banks and between different branches. In addition, most of the offices of entertaining banks also provide on-line loans, often granting an interest rebate on the loan application in the store. Conversely, few direct banks offer personal credit counseling at a few locations.
Direct banks and branch banks: credit service and quality under scrutiny
The quality of service of an online bank is reflected above all in how easy the website is to operate and how quickly and comprehensively the bank reacts to inquiries. For a branch bank, the length of time before appointments for comprehensive credit counseling is an essential element of the good quality of advice. Ideally, for loans with small amounts, it is also possible to submit the relevant application directly to the branch office without an appointment. The quickest reactions and the most complete answers to customer questions are not provided by the traditional online banks, but by the lending staff on the Internet who are also responsible for branch banks offering online loans. An understandable and easy-to-use loan calculator is available on the website of each bank. On the other hand, answering e-mails often takes too much time; moreover, the answers are not always meaningful. In extreme cases, call center employees are obviously provided with specific response modules, from which they can select the one that best suits the request. However, in the case of rare questions from the prospective buyer, no existing module completely complies with the aspirations of the prospective customer.
Differences in interest rates and conditions
In most cases, lending rates for online banks are actually lower than for branch banks. This is borne out by the financial institutions, which grant their loans in both ways and give their customers a discount on the interest rate for the online loan application. A credit comparison is possible on the websites of all banks – but every bank is convinced that it would be the best. In addition to differences due to the term specifically selected by the creditor and – rarely – the amount, some financial institutions have interest rate differentials depending on the creditworthiness of the applicant.
For credit-related lending rates, banks must use an interest rate in their sample calculation that most applicants can actually achieve. Nevertheless, it is beneficial for the customer to immediately get a fixed interest rate on the loan they want. With regard to the rating of the credit rating, most financial institutions do not provide any information, only a few banks expressly say that they take into account other creditworthiness data in addition to the private credit score. For a complete credit comparison, credit customers do not only pay attention to the different interest rates of the individual banks, but also to the terms of the repayment. The differences in this case are not between branch banks on the one hand and direct banks on the other hand, but between the various institutions of the respective banking group.
Only a few online banks or traditional financial institutions offer their borrowers the opportunity to receive unlimited special unscheduled repayments or even a complete early repayment without prepayment interest. On the other hand, the reference to the right to premature full or partial loan repayments without regard to costs is popular. However, this is not a special benefit of the bank, but simply the compliance with the legal requirements. Consumers often read, as often as unconsciously and erroneously, that the early loan repayment would be free of charge. On the other hand, a few online banks or branch banks also offer the possibility of occasionally suspending at a rate without special request. Depending on the bank, later changes made by the customer are often carried out either only after a lengthy negotiation or against payment of a change fee.
Few credit agreements explicitly provide that the borrower may extend the term if necessary, which reduces the monthly loan installments. For credit customers, clear rules in the loan agreement are advantageous compared to relying on the goodwill of the bank. Even with the possible maturities exist between the different financial institutions differences. Credit terms of eight to ten years offer relatively few banks both online and in the branch, with even longer contract periods, the number of potential lenders is reduced even further. Similarly, low loan amounts below € 3,000 and high loan amounts over € 15,000 are not possible with any online bank or branch bank. In addition, the maturity of most lending banks can only be changed on a yearly basis, while very few financial institutions allow their customers to select the desired loan repayment period on a monthly basis.
Branch banks accept freelancers and the self-employed rather than direct banks
Not every bank accepts freelancers and self-employed as borrowers. The number of branch banks that lend exclusively to employees is higher than the corresponding number of branch banks. Nonetheless, there are some classic financial institutions that do not want credit customers with self-employment income as well as direct banks that have extended their credit supply to this group of people. There are also few online banks where freelancers but no traders can borrow. Even during parental benefit payments, it is easier to take out a loan with a branch bank than with a direct bank.
This also applies to borrowers with atypical cash receipts, who earn part of the income through a side job or by a separate side job. The fact that the corresponding cash receipts are included in the budgetary accounts is more often the case when applying for personal credit in a branch than when applying for a loan online.
However, it is advantageous for all atypical loan seekers that online banks provide their lending exclusions as well as complete information about the income flowing into the loan application check easily traceable on the Internet. In contrast, the websites of the branch banks usually do not receive the corresponding notifications, so prospective credit customers often only find out on demand that they are not eligible for a specific bank as a borrower.