This article will guide you about different types of loans available in Germany, procedure of applying and the requirements of being eligible for them.
Requirements For Getting a Loan in Germany
Credit loans are not offered easily in Germany. This is because of the credit conservative approach of the country. Meeting the basic requirements is necessary if you are willing to get a loan for yourself from a bank.
- Good SCHUFA score: good credit rating
- Stable income: you will have to submit your salary slips. For freelancers, monthly billings can be shared. If you are a freelancer getting regular work from a single source, you can ask for a written letter from the company proving that you’ll be getting regular assignments and potential income you’ll earn.
- Resident in Germany: Residence permit or VISA that can cover the entirety of loan period
If you are meeting the above requirements, you can potentially get a loan from a bank, at a low interest rate.
For those who are unable to fall in above conditions, hold your disappointment, since there are many other institutions offering credit loans, but at higher interest rates.
Types Of Loans in Germany
- RatenKredit – Installment Loans: this is the most common loan type which you return with variable monthly payments.
- RahmenKredit – Personal Credit Loan: This is a personal loan but with a fixed monthly payment.
- AutoKredit – Car Loan: This loan is also a fixed installment but solely for purchasing a car. It’s a secured loan since the car you purchase will be considered an asset.
- SofortKredit – Instant Loan: This loan is paid out to you in a couple of days. The credit range is less than with an installment-based loan and interest will be high.
- Immobilienkredit – Mortgage: This is a secured loan solely for purchasing or building a house/apartment.
Even though it’s all money in the end, you have to ensure that you are applying for the right type of loan with the right kind of loan provider. If you happen to apply for a mortgage, chances of getting a loan are high if you acquire at least 20% down payment of the house/apartment.
Similarly, if you happen to go for a car loan, it is more beneficial to visit the car dealer directly. They usually have good deals and also are well connected with banks.
Where to Get a Loan in Germany
There’s a wide array of organizations who offer loans in Germany. These days, online platforms are becoming a good and popular choice. Their fast and easy procedure of obtaining a loan is better than that of traditional banks. Following is the list of options for loans in Germany.
The very first option is to visit your own bank or any other. You can consult with the management to see whether there is a possibility of getting a loan.
Though banks operate in a traditional way and prefer taking in-person or over the phone, they can benefit you with low interest rates. But to get that, you will have to present a good credit score with a reliable income.
Some of the banks where you can get a personal loan:
Loan Comparison Platforms
Online comparison platforms are one of the best ways you can acquire a loan in Germany. These platforms are Verivox, Smava, Tarifcheck and Loanlink24.
- Verivox can help compare all kinds of stuff like loans, car insurance, electricity plans and internet deals. Up to 100,000 euros with a payback period of up to 10 years is available. The platform is SCHUFA-neutral.
- Smava is Germany’s first FinTech company. It has a 5-star rating in Germany for finding credit. You can apply at different banks with Smava such as Postbank, Commerzbank, Unicredit, Deutsche Bank and Sparkasse.
- Tarifcheck is also a credible online platform where you can see a variety of loan and mortgage options. You can simply select your loan amount and the duration. You will then see available options.
- Loanlink24 is an online platform for comparing specifically mortgages. More than 400 German banks have published their offers. The best part is, the platform is 100% English.
These are organizations who specialize in offering loans and credits. Unlike traditional banks, their process of acquiring loans is much easier. There are low interest rates if you are going for a short-term loan (4-10%). Some of the options are:
The credit amount with credit institutions ranges between 500 euros to 300,000 euros. The duration ranges between 12 to 120 months. With credit institutions, it is possible to get a loan without SCHUFA. But you’ll have to show a regular monthly salary.
These are websites which offer a marketplace for both borrowers and lenders. Sometimes, the investors just invest their funds in the website. Later, the website itself chooses the people who can borrow it. Peer-to-peer lending is a fast-growing loan provider in Germany.
Since you are borrowing from private lenders on the website, the chances of getting a loan are high. One more huge advantage of this service is that your credit score won’t be deciding all the things.
In case you have a bad SCHUFA score or a negative one, you can still get a loan. The interest rate ranges from 3 percent to 14 percent.
In peer-to-peer, Auxmoney is the largest loan provider in Germany. It offers a favorable interest rate with loans ranging between 1000 euros to 120,000 euros.
This loan type is common especially among foreign nationals. This is instant credit made online and received within hours.
Mini loans are best for those needing money on an urgent basis but not a hefty amount. These loans range between 500 euros to 1500 euros.
On the other hand, the interest rate for these is high which goes up to 15 percent. Some of the mini loan options are:
Vexcash is a good option if you urgently want a loan. For new customers, the platform offers a 500 euros loan. If you are able to return the amount within a month, next time, you can get a loan of up to 3000 euros.
Loans with Bad or No Credit Score
It is quite problematic if you have a bad credit score or don’t have a score. But this doesn’t restrict you from getting a loan in Germany. There are financial institutions and some banks who offer loans even without SCHUFA.
Maxda is one of those banks. They have simple criteria for both German citizens and foreigners. It can offer you a loan of up to 7500 euros. The returning period is allowed over 40 months.
It does require you to have a regular income of 1130 euros a month at least. Also, your age should be between 18 and 60 years.
If in case your salary is lower and your age doesn’t fall in the above mentioned , you can still bring a guarantor and get a loan.
Tips for Getting a Loan in Germany
Below are five tips explaining how you can get yourself a good loan deal.
Choosing the Correct Loan Type
There are different loan types as described above. If you meet the requirement of a secured loan for buying a house or a car, make sure you apply for a loan for that specific category.
Your credit score is pivotal in getting you a good loan deal in Germany. Knowing your SCHUFA score will help in the evaluation of your chances. Also, try improving the score as it will increase the chance of getting a good loan.
Related Article: All You Need To Know About SCHUFA Score (Credit Score)
Realistic Loan Amount and Duration
Choose your loan amount and duration carefully. Calculate it beforehand so that I can manage the payback rate easily.
Apply for Loan with Another Person
You can also try applying for a loan with another person, for example, your spouse. This can minimize the risk at the bank’s end and will consequently lower the interest rate.
Compare Loan Offers
One of the best ways to decide which loan is suitable is by comparing them. Don’t rush and accept the first offer from the bank. Take time and compare loans thoroughly. Must review the annual percentage rate while you’re at it.