Loans In Germany

Loans in Germany: Good to know

Loans in Germany are contracts where you get money now and pay it back later, either over a period of time or in a lump sum. To reimburse the institution or the person giving the money, you usually return more than you receive. This fee usually consists of interest and other fees over time.

Simply put, loans allow you to spend the money you need now and repay it in the future.

The difference between a credit card loan and a bank loan

Often people do not know the difference between loans on credit cards and bank loans - debts that you get from the bank by signing a contract. Both loans are similar and both are used to borrow money approved by the bank.

The difference is that with card loans, money is removed from your account. This means that in most cases you go into deficit on your account approved by your bank, while with loans, ie debts, which you take in the bank, you get money in your account and depending on the purpose you can do with it what you want - you need.

Usually, loans in Germany from a bank are a better option if you need more money because of the lower interest rate than credit card loans, because credit card loans in Germany in most cases have a higher interest rate, that is, you have to pay back more money if you borrow money.

How loans work in Germany

When you need money, ask the bank or any lender to provide you with funds. To do this, you usually apply or “apply” for a loan, and the lender or bank decides whether to approve your application or not. Lenders or the bank make a decision based on yours creditworthiness (SCHUFA) - your estimates of whether to repay the loan or not. 

Loans in Germany, or your creditworthiness, depends on several factors, and two important factors are your credit history and the income you have available to repay the loan. 

How to take out a loan for employees in Germany

There are several ways to raise a loan for employees in Germany. We will mention the two most popular:

1. Going to the branch
2. Online loan application

Going to the branch

Local banks are the first places many people think of when thinking about taking out a loan in Germany. Of course, this is normal thinking because if you are already a bank customer you know their work and it provides some security in a person’s head. After all, it's about money.

If you apply there, you are likely to meet face to face with a loan officer, the experience will be personal, and the officer can easily walk you through the application process. Compared to other options, banks usually have higher credit qualifications or credit terms. However, if you are already a client, the bank could shorten your paperwork when taking out a loan in Germany. 

However, although this is an easy way, the interest rate at your local bank is often too high. We recommend that you visit other banks and see the offers they offer so that you can take the best offer for you. Going to more banks is tedious and takes a lot of precious time, and we can recommend you a better option. So we come to the second option of taking a loan in Germany, and that is online loan application. 

Online loan application in Germany

If you are wondering how to take out a loan in Germany, online loans are an option for you. This is another popular way to take out a loan in Germany. Today, you can get almost anything online, and that includes buying a house, buying a car, starting a business, and thus taking out a loan online.

Online loans allow you to complete the loan application process online, from the comfort of your home, from comparing rates to applying and receiving funds. You can usually get your own loan and manage your account without going to a bank branch. Some online loans in Germany can be approved so quickly that it takes less time to take an online loan than it takes to drive to a bank branch.

As with any financial product, you need to research the company you work with well and make sure your loan suits you.

What types of loans do we have in Germany

We have several types of loans in Germany, and we will list some of them:

• Private loans or loans for free use;
• Car loans;
• Loans for the construction or purchase of real estate;
• Reprogramming loans;
• Business loan.

Private loan in Germany or loan for free use

Private loan in Germany is a loan used by private individuals for free use. These loans are non-purpose and you can use them for any purpose. Private loan in Germany often used to finance travel, larger appliances, furniture, schooling, and minor renovations or car purchases.

The maximum amount to be approved in most cases is up to € 60000. If you want to buy land, a house or maybe an apartment outside of Germany then this is also an option for you. 

Car loan in Germany

A vehicle loan or a car loan is an installment loan with a specific purpose that you can use to buy a vehicle (eg a car, motorcycle or mobile home). In most cases car loans they are cheaper than loans in installments for free use (Private loan). Because the financed vehicle offers additional security to the lender.

Car loan in Germany it has the advantage that you can buy the vehicle from a dealer with a one-time payment without installments and often take advantage of cash discounts (price reduction of up to 20%).

Loans for the construction or purchase of real estate in Germany

Credit for the construction or purchase of real estate is a broad term in Germany that refers to a loan used to finance, ie the purchase of an apartment, house or other property, as well as its construction.

We have a few important facts:

• With a home loan, you get a loan from your bank that you repay in installments (plus interest).
• Real estate loans in Germany are earmarked, so you can only use the loan for the agreed purpose.
• Banks most often approve loans to build a house or buy real estate.
• Real estate credit can also be used for subsequent financing or - in special cases - for modernization or renovation.
• In the calculation, special consideration should be given to its capital ratio, effective annual interest rate for the real estate loan and maturity.

Reprogramming loans in Germany

If you are having trouble repaying debts, a rescheduling loan may be a good option. It allows you to consolidate all your current loans into one loan with more affordable monthly repayments, usually over a longer period.

If you have taken a loan with a high interest rate, you can try to find an offer with a lower interest rate with the help of the loan comparison portal. If you manage to find such an offer, take the amount you owe for the old loan, repay it and continue to repay the loan with a lower interest rate, which leads to eventually repaying a smaller amount of money than you would repay for the old loan. If you want to reschedule a loan you can find options for it here.

Business loans in Germany

Business loans in Germany are often requested for funds or investments that will be used in your business. Business loan therefore, it is directly related to your project: it is suitable for procuring goods and materials and for overcoming financial problems. PA credit that is suitable for long-term investments can be used to buy machinery, pre-finance goods or finance digitization. It’s about starting a new business and growing it.

What are the conditions for a loan in Germany

Loans in Germany work the same way as anywhere else in the world: you get money from a lender and agree on a monthly repayment rate. The lender makes money from this arrangement by adding a fee to the loan amount, which will be added to each installment you repay.

In general, the rate represents the lender's trust in you, as well as the risks it takes by giving you money. The rate is much lower when the dangers are minimal. Current salary, marital status, age, health profile, savings, bonds, stocks, property ownership and other sources of income are all things the lender takes into account.

There are several standards you must meet to get a loan in Germany. You must meet these requirements:

• You have to live in Germany.
• You must be over 18 years old.
• Be prepared to provide a consistent and significant source of income (3 last payroll for employees, up to two years of balance for freelancers)
• Being able to present a good SCHUFA result.

Based on your country of origin, you can believe that this investigation is either very intrusive or quite routine. It is important to note that Germans are not big fans of credit, nor do they owe money to others.

They are known for not owning their homes, not using credit cards. They have a debt-to-income ratio that many countries around the world admire. As a result, lenders are particularly cautious when it comes to lending in Germany.

You can apply for a loan in person, by mail or by fax. Many banks also allow you to submit your application online. For this, it is advisable to use a loan calculator because you will be able to evaluate different offers and choose the best bank. You can then submit your application online through our website.

Loan application for employees in Germany

If you want to get a loan from a bank, you must first fill out a loan application. This is sent to the bank, which determines whether you qualify for the loan.

The following information is often included in an application for an employee loan in Germany:

• Total loan amount
• Desired loan length
• Required loan installments
• If applicable, scheduled start
• loan repayments
• Entering personal data (personal data, financial situation)

It should be emphasized that the potential borrower will be required to present documentation that proves his creditworthiness as well as his financial situation. A good credit rating is especially necessary for financing.

In the loan agreement, the borrower receives a personal self-assessment form. All facts provided in this form must be verified. As a result, it is crucial that you provide accurate information about yourself.

Furthermore, the lender will request SCHUFA information to determine the applicant's creditworthiness. As a result, double-check your SCHUFA records to ensure that all previous loans have been repaid.

You can apply for a loan in person, by mail or by fax. Many banks also allow you to submit your application online. For this, it is advisable to use a loan calculator because you will be able to evaluate different offers and choose the best bank. You can then submit your application online through the options provided above.

Loans in Germany from private lenders

This is a relatively new option on the market, but it is worth considering. Instead of one big bank lending you money, a group of private individuals pool their funds. Due to the interest rate, they are able to increase their investment when you repay your payments. Peer-to-peer credit is a term used to describe this type of loan.

Loans in Germany with a very short term

Often, short-term loans in Germany are an option that you need after unexpected expenses, such as paying a deposit for a rented apartment in Germany. Although it is usually recommended to seek support from friends and relatives in such situations, there are several portals that can help you if you need a small amount of money quickly.
Although the interest rates are slightly higher than for long-term loans, payment is made only once a month, which reduces the risk of drifting.

Creditworthiness in Germany (Schufa in Germany)

Some loans in Germany, regardless of the type of loan, take into account your creditworthiness, while others do not.
When they do, it goes in favor of people with strong SCHUFA results because then the interest rate is reduced. This is called bonitätsabhängig (depending on creditworthiness) or bonitätsunabhängig (regardless of creditworthiness).
If you have a low SCHUFA rating, this is an important concept you need to know; look for loans that do not take this into account.

Why take a loan in Germany?

There are a number of reasons why you might need a loan in Germany. Your life projects will change as your life as a foreigner progresses. As a result, you may need a mortgage to buy a house, a loan to buy a car or a small amount of money to realize your business idea. Whatever it is, approaching this daunting question is quite a challenge, especially when German banking conditions are added!

Banks want long-term relationships with their customers, which implies that they want them to stay in Germany for many years to come. Germany is known for its stable environment and promising future. This increases the likelihood that you will be able to repay your loan.

It may be more difficult for some of you to get a loan in Germany as a foreigner because our arrival in Germany resulted in an unresolved situation that initially harmed our SCHUFA result. It takes time to get back on our feet, and in the meantime we may have left unpaid expenses.

Below are some of the reasons why you should take a loan

Someone may seek private credit if you need money soon to cover expenses, an unexpected expense, or something else that requires quick attention. Most financial institutions offer online forms to help you find out if you have been approved in minutes. According to your lender, you can get the funds the same day or over several business days.

The loan amount can be used to consolidate debts, especially credit card debt. It is also one of the most common reasons for taking out a personal loan. Personal loans in Germany have lower interest rates than credit cards, especially if you have good credit. The best personal loans in Germany have interest rates as low as 2,5%, which is far lower than the double-digit percentages charged by most credit cards. You can get a personal loan, pay off your credit card balance, and then make one monthly payment to your new lending institution.

You may not even have to cover some significant fees if you move near where you now live. However, if you are leaving the city, you may need additional funds to cover the cost of relocation. Moving long distances involves paying for packing stock, potentially hiring people to move, and transporting your goods to a new location.

Private loans in Germany can also be used to help find a new home. If you discover an apartment, for example, you may have to pay for the first month, the last month and a deposit. You may also need funds to furnish your new apartment.

These are all reasons why loans in Germany would be a good option for you, if you are interested in loans in Austria you can visit Atkredit , and if you are interested in loans in other European countries, you can visit areasinfinance.com