If you want to move into a new apartment or house, you not only have to sign a rental agreement, but in many cases you also have to pay a rental deposit. It is considered security and is managed by the landlord on a separate account. With this deposit, the landlord has the opportunity to settle outstanding claims relating to the rent or repairs that were caused by improper use of the property and were caused by the tenant.
As a rule, the deposit amounts to three basic rents. This means that as a tenant you have to raise a fair amount in order to only be able to rent the property. Then there are the costs for the renovation and the actual move.
A loan for the deposit – surety, overdraft facility or installment loan?
As a tenant you have several options to take out the loan for the deposit. The rent deposit guarantee is relatively new and therefore also interesting. This is not a loan, but a kind of insurance. If you, as a tenant, cause damage to the rented property or do not pay the rent in full, the insurance will step in. The insurance company bills directly with the landlord. The policyholder, i.e. the tenant, only pays an annual contribution to the rent deposit guarantee. The fact that no loan has to be taken out for the deposit can be considered an advantage. On the other hand, it is disadvantageous that the money paid into the guarantee is ultimately not paid out again. In addition, many landlords do not recognize the guarantee and would like the deposit to be paid directly.
The overdraft facility as a loan for the deposit
The overdraft facility as the supplier of the required rental deposit may be a very convenient solution to the problem. As a rule, it does not have to be applied for first, as it is provided by the bank when the current account is opened. It also contains enough money to cover the cost of the deposit. On top of that, the repayment of the money, i.e. the balance of the account, can be freely arranged.
However, the fact that the overdraft facility is accompanied by very high financing costs is less attractive. The average interest rate is 11 to 15 percent. This is double to triple compared to a normal installment loan. In addition, the flexibility of the current account is eliminated by using the dispo. Because the overdraft facility is exhausted, it offers no opportunities for spontaneous investments and bridging further financial bottlenecks.
The installment loan as a loan for the deposit
Last but not least, there is the normal installment loan, which offers itself as a loan for the required deposit. It is available as a small loan from almost all banks. Depending on the creditworthiness of the borrower and the duration of the repayment, the effective interest rate is set by the banks. It usually ranges between 3 and 6 percent.
The low interest costs and little security that have to be provided around the loan speak in favor of the installment loan. The deposit can be paid on time using the installment loan and will be repaid with interest at the end of the tenancy – provided that no damage has been done to the landlord.
The monthly financial burden of the repayment speaks against the installment loan. However, since these can be influenced individually by adjusting the rate based on income and the free available budget, the financial burden is not very significant and should be realizable even with a smaller income.