There are significant differences between direct banks and branch banks in terms of interest rates, but also in terms of services for loan seekers. This finding is hardly surprising, given that consumers expect online banks to offer lower interest rates and branch offices to provide better advice when taking out a loan. In fact, differences in effective lending rates and service are not exclusive to the two banking groups, but also exist between different direct banks and between different branch banks. In addition, most banks that maintain branch offices also grant online loans, often granting an interest rate discount compared with applying for a loan at a branch office. Conversely, few direct banks also offer personal credit counseling at a few locations.
Direct banks and branch banks: credit service & quality on the test bench
The quality of service of an online credit bank is shown above all by how easy the website is to use and how quickly and comprehensively the bank responds to inquiries. At a branch bank, the time it takes to make an appointment for comprehensive credit counseling is a key element of good counseling quality. Ideally, in the case of loans for small amounts, it is also possible to submit the corresponding application directly at the branch without an appointment. The fastest reactions and the most complete answers to customer questions are not given by the classic online banks, but by the employees responsible for online lending at the branch banks that also offer online loans. A comprehensible and easy-to-use loan calculator is indeed available on the website of every bank. Answering emails, on the other hand, often takes too much time, moreover, the answers are not always meaningful. In extreme cases, call center employees obviously have certain response modules at their disposal, from which they select the one that most closely matches the query in each case. However, in the case of infrequent questions from the prospective loan customer, no existing module fully matches the prospective customer's concern.
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Differences in interest rates and conditions
In most cases, lending rates are actually lower with online banks than with branch banks. Contributing to this result are the financial institutions that grant their loans in both ways and give their customers a discount on the interest rate for online loan application. A credit comparison is possible on the web pages of all banks – however also each bank is convinced, it would be thereby the best. In addition to differences based on the specific term selected by the loan customer and – rarely – based on the amount, some financial institutions have interest rate differences depending on the creditworthiness of the applicant.
With creditworthiness-dependent credit interest the banks must indicate an interest rate in their sample calculation, which most applicants can actually reach. Still, it is advantageous for the customer to know immediately a fixed interest rate for the desired loan. Regarding the assessment of creditworthiness, most financial institutions do not provide any information, only a few banks explicitly say that they take into account other creditworthiness data in addition to the schufa score. Credit customers pay attention with a complete credit comparison not exclusively to the different interest rates of the individual banks, but also to the conditions of the repayment. The differences in this case are not between branch banks on the one hand and direct banks on the other, but between the various institutions of the respective banking group.
Only a few online banks or traditional financial institutions offer their borrowers the possibility of unlimited free unscheduled repayments or even complete early repayment of the loan without charging early repayment interest. Popular, on the other hand, is the reference to the right of an early full or partial loan repayment, without going into the costs involved. However, this is not a special discount offered by the bank in question, but simply compliance with the law. Consumers read with appropriate advertising references often just as unconsciously as erroneously that the early loan repayment would be free of charge. On the other hand, also few online banks or branch banks offer the possibility of occasionally suspending an installment without a special application. Later change requests of the customer are often carried out depending upon bank either only after a lengthy negotiation or against the payment of a change fee.
Few loan agreements specifically provide that the borrower may extend the term if needed, thereby reducing the monthly loan payments. For credit customers, clear rules in the credit agreement are advantageous over relying on the goodwill of the bank. Even with the possible terms there are differences between the various financial institutions. Loan terms of eight to ten years are offered by relatively few banks, both online and in the branch; even longer contract terms reduce the number of possible lenders even further. Likewise, low loan amounts under 3000 euros and high loan amounts over 15 000 euros are not possible at every online bank or branch bank. In addition, at most credit banks, maturities can be changed only on an annual basis, while extremely few financial institutions allow their customers to select the desired repayment period of their loan on a monthly basis.
Branch banks are more likely to accept freelancers and self-employed persons than direct banks
Not every bank accepts freelancers and self-employed persons as borrowers. The number of branch banks granting loans exclusively to employees is higher than the corresponding number of branch banks. Nevertheless, there are some traditional financial institutions that do not want credit customers with income from self-employment, as well as direct banks that have expanded their credit offer to this group of people. There are also few online banks where freelancers, but not tradespeople, can take out a loan. Even while receiving parental allowance, it is easier to take out a loan at a branch bank than at a direct bank.
This also applies to borrowers with atypical cash inflows who earn part of their income from a part-time job or self-employment. The fact that the corresponding cash receipts are included in the budget calculation applies more often when applying for a loan in person at a branch than when submitting a loan request online.
Advantageous for all atypical credit seekers is however that on-line banks indicate their exclusions for the granting of credit just like complete information over the incomes flowing into the credit application examination easily comprehensibly in the internet. The websites of the branch banks, on the other hand, do not usually receive the relevant notifications, so that prospective loan customers often only find out on request that they are not eligible for a specific bank as a borrower.