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I ran across this offer (German) which basically promises me 1000 euros for free (or rather, they give me an additional 4 euros), and as far as the given offer shows, there are no further costs or other drawbacks. Given that this is a well known German site (with German consumer regulations) I would pretty much trust the given conditions.

This seems dubious. My interpretation is that this means that the lender expects the market to fall more than 0.4% within the next year which is an obvious bet. However, for someone who has no doubt being able to pay the monthly 83 euros (i.e., long term employed), this should be an obviously (too) good deal. Assuming that the market will eventually (within the next 10+ years) recover, investing the money into the stock market would guarantee profit, or at least somebody else covered your investment fees.

Given that the bet of market recovery within the next 10+ years is rather low risk*, I get the feeling I am missing something as the lender could do the same themselves.

Why would a lender offer such conditions?

*) There is a risk that this is not the case, but if the market stagnates or goes down over the next 10+ years, we most likely have other issues at hand than the gain or loss of 4 euros.

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    It's a shill offer. I once applied (not sure if it was check24.de or smava.de) for a similar offer, but they even offered -5% p.a. for 1k€ and 1 year, so I thought it's worth the hassle. Surprise, despite high income and no negative (Schufa) rating I was not eligible, no particular justification or reason given. Instead they now know my address, income, date of birth and some other data including my email which they now regularly spam. 0/10, would not recommend.
    – Willi Fischer
    Commented Sep 18, 2020 at 13:26
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    @WilliFischer If you ask support to delete your account as per the GDPR, they must stop spamming, otherwise you might want to contact the data protection agency of your country (BfDI in Germany).
    – danuker
    Commented Sep 19, 2020 at 13:28
  • @danuker Thanks, will look into it.
    – Willi Fischer
    Commented Sep 21, 2020 at 6:14

6 Answers 6

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Since 18 September last year, the European Central Bank has paid -0.5% on overnight deposits from Eurozone banks. If the bank is charging you -0.4% interest, they’re still doing better than they would be if they weren’t lending the money out.

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    While I agree with your math, I must wonder why do overnight deposits rather than keep the money in their own accounts, if the rate is negative?
    – sharur
    Commented Sep 18, 2020 at 16:24
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    "they’re still doing better than they would be if they weren’t lending the money out": Sure, assuming that you pay the whole amount back. Accounting for defaults, this is a very low spread for them to make a profit, unless the borrower has an immaculate credit profile.
    – Alexandre Cassagne
    Commented Sep 18, 2020 at 16:37
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    @sharur money.stackexchange.com/questions/112874/…
    – Carsten S
    Commented Sep 19, 2020 at 9:39
  • While check24 has applied for a banking licence, they do not do the loans themselves, so from whatever the bank would save by this scheme, they also would have to pay check24. And given the crazy competetive marketing in fintech, the advertising click that brings an internet user to the page is probably already more expensive than the euro they make per customer. If that was a money-saving scheme, banks would not give out loans llimited to 1000 Euro each, they would lend 10 billions Euros to Volkswagen and be done with it.
    – Eike Pierstorff
    Commented Sep 19, 2020 at 19:53
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Banks do all kinds of crazy things to attract customers. Paying 4 euros seems like a very low price for customer acquisition. So really the thought is that you would get this loan from them and be their customer for life.

For some people, there are a lot of better ways to earn 4 euros. The hassle of having to make a monthly payment may not be worth it.

I would be tempted to take this offer. Borrow the money, use it to earn more money, and set up an auto draft. And that is really the power of this offer; I am a person that does not borrow money. By giving me a small amount of money, I am tempted to become a customer.

When you consider banks here in the US will give customers hundreds of dollars to open a checking account, this seems like a small price to pay even when one factors in defaults on the loans.

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    This has nothing to do with "trying to attract the new customers" as the main point. It's just a way how to preserve money by the institution, which they would otherwise lose because of the negative interest provided by the central bank. That's why they're trying to "get rid of their money for free", too.
    – Andy
    Commented Sep 18, 2020 at 13:03
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    @Andy that would only make sense if processing the loan would cost them less than the amount they gain by making the loan. If they were offering 10 000 or 100 000 Euros, or arbitrary sums, to the same conditions your theory might make sense, but 1000 Euros is a completely pointless amount to take as loan for anyone who is eligible for a loan in the first place. I would agree that this is a novelty item to attract customers.
    – Eike Pierstorff
    Commented Sep 18, 2020 at 15:55
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As Pete B. said, it's most likely customer acquisition. However, I'd be wary of two things:

  • Any hidden costs, e.g. a monthly fee for your monthly payment, variable interest rate, any add-ons like a permanent bank account with that bank (with a monthly fee), etc. With these costs the bank might the winning party here.
  • Advertisement agreements, e.g. agreeing to be contacted via phone, mail, or email.

Also, stocks are not necessarily the best investment option for a 12 month period. What if there's a huge, 2nd virus wave over Christmas? Personally I think there's too much volatility within one year. Better options might be short term bonds or discount certificates.

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  • Short-term German Bunds would be a bad idea, for the very same reason that the -0.4% is offered. Due to mass Euro printing by the ECB, interest rates have gone negative, and German Bunds are among the worst (most negative).
    – MSalters
    Commented Sep 18, 2020 at 8:12
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Don't forget this is a credit just like any other. It will affect your credit rating. This will be good if everything happens just as planned, but bad if problems occur. The credit will show up until paid back, so if you need another credit until then, you might get problems, as you already have one.

Lastly, your rights as a customer may be reduced, e.g. regarding premature canceling. I could find hints about 0% credits only and seems to have become better in the last years, but negative payments are so new no court had to rule about them yet.

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Some thoughts on this

  1. Are you actually going to get it? You probably only get it with a perfect credit rating in which case you are unlikely to actually need it and spend some of your time to earn 4€. This is probably rather meant as an advertisment to get people with a lesser credit rating interested and selling them something that will have positive interest
  2. A bet on a stock market recovery...the German stock market is almost at it's all-time high. There is not much to recover any more. In many other countries markets are also a lot closer to what they were one year ago than one might expect in the middle of a pandemic. Nobody knows the future but I do not see much of a recovery coming up. Volatile investments for a short fixed time frame are also problematic. And for the non-volatile investments you are almost not getting anything
  3. Interest in general is very low at the moment. If you finance real estate you can easily get 0.5-0.6% interest for 10 years.
  4. If you are a bank and park money at the central bank you are paying dearly and it does not look like this is going to change anytime soon
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I think you are making it overly complicated with "long term employed" and "market recovery within the next 10+ years". There is no need to invest the borrowed money in stocks. Just keep it in a savings/checking account (those presumably don't pay significant interest, but don't cost interest either). Make the monthly payments out of the account and you will have an extra €4 left at the end. That is sufficient to show this is a good deal (assuming there are no hidden fees). Any additional investment strategy is optional.

Incidentally: "market to fall more than 0.4% within the next year which is an obvious bet" -- this is wrong (and irrelevant) -- stocks are a risky investment and their expected return is not the same as the risk-free interest rate. See here.

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    don't cost interest either is nicely said. However, check twice before depositing money.
    – Bernhard Döbler
    Commented Sep 17, 2020 at 12:34

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