5% Bonus

Overcoming Germans’ aversion to debt: free loans

DDR – Mark-Scheine 1973
Do you need a haircut on your loan? Source: DPA.

Germans are notoriously allergic to debt. They have fewer credit cards than in any other major country and less household debt as a percentage of GDP than all but two other western European nations: Italy and Austria. Even in the age of rampant online shopping, 80 percent of all purchases are still made in hard cash, according to the Bundesbank, Germany’s central bank.

So how does a start-up company that makes profits by getting people to borrow money accomplish that nearly impossible task in tight-fisted Germany? By offering loans at negative interest.

That’s right. Borrow €1,000 ($1,230) for 36 months, and these firms will not only not charge the borrower interest, but will pay a 5-percent bonus for the privilege of lending them money. Admittedly, that’s only €50, but that shows how desperate they are.

The extraordinary loans are being offered as part of an aggressive marketing campaign by two online portals that offer consumers comparisons on loan rates, Check24.de and Smava.de, which are the German equivalent of Lending Tree in North America. The competition between them is now so heated that in the few hours this article was being written, the negative interest being offered by the two companies shot up from 3.5 percent to 5 percent.

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