Will zero interest rate loans become normal?
Recently two credit providers have offered loans in the amount of $ 1,000 for a term of three years without interest. The reason for this lies in the acquisition of new customers. However, it is questionable whether the new marketing strategy will prevail.
There are always references to the Cream Bank in the extraordinary offers of the financial institutions. In the past, this has repeatedly lowered the key interest rate. The key interest rate is now only 0.05%. Best bank bases its own offer of loans without interest on the fact that consumers should also benefit from the low interest rates. The lucrative offer includes a loan of 1000 USD, which is granted for 36 months without interest. The loan provider also wants to alleviate the annoyance of savers.
Best bank is not an isolated case
The new marketing strategy of the credit provider Best bank is by no means a single phenomenon. According to the Mega financial advice in Frankfurt, there are currently two institutions that offer loans without interest. In both cases, the term of the loan is 36 months and an interest-free amount of $ 1,000 is granted. The prerequisite for being able to benefit from the interest-free offers is a positive credit check.
Potential borrowers may wonder why credit institutions should make such offers. The motivation of the institutions is quite simple: advertising effects. The advertising behind the offers gives companies the opportunity to win new customers. The principle is similar to the strategy of granting higher overnight interest to a certain group of people.
Lite Lender as the first interest-free provider
Lite Lender is the first provider to offer an interest-free loan. The company is a fintech, i.e. a technically versed bank competitor. The main focus is on brokering private loan providers to private borrowers. However, the brokering of bank loans has recently come into focus. In order to be able to use the zero-interest offer as advertising, Lite Lender is working with the Fidor Bank. The internet platform advertises that the bank bears interest from the bank. Lite Lender thus provides an advertising budget for subsidizing the interest. The goal is to attract customers who may need additional credit. The strategy therefore includes a lure.
Negative numbers for new customer acquisition
Best bank is the second credit provider that offers zero interest on loans. Behind the comparison portal is Astro Finance, which is a white label of the Best Bank. Unlike Lite Lender, which subsidizes interest from the partner bank, the business model is different. Best bank itself offers the loans without interest to attract new customers. Only the costs for advertising and sales would be accounted for by Best bank.
The distinction between the two business models is secondary, however, so both models are based on the same interest: new customers. To achieve this goal, both credit providers initially accept negative numbers.
Expensive advertising measure?
However, experts calculate that the advertising measure is not expensive. Best bank waives around $ 42 on an interest-free loan of $ 1000 with a term of 36 months. However, the bank also saves approximately 3% commission, which would otherwise have to be spent on arranging the loan offers. In addition, administrative costs of over $ 4 would be incurred for three years. Herbst emphasizes that the bank has won a customer for about $ 16 with the advertising measure.
In the long run, however, even those involved would have doubts that any business models could prevail. Rather, the offers without interest are an exception. Mega is also of the opinion that the advertising measure would not spread as much as the granting of higher interest rates on call money.