Brief overview: How to get a loan!
- Requirements: To get a loan, you must be at least 18 years old and have a permanent residence in Germany.
- Credit rating: A loan always requires that you have a good credit rating and are therefore “creditworthy” from the bank’s point of view. If you have not been guilty of anything so far, chances are very good to get a loan.
- Clean Credit Bureau: Almost every bank asks the Credit Bureau information for the credit check. In the best case, you have no negative entries from the past. If so, a personal loan could be another option.
- Additional security: A second borrower or guarantor gives the bank more security. You should consider this option if you are not “creditworthy” yourself.
You need some capital and ask yourself ” How do I get a loan? “Or you may have doubts whether you are creditworthy – for example because of a bad Credit Bureau – and ask yourself the question” Do I get a loan? “
What are the requirements to get a loan?
The first question is relatively easy to answer. You can get a loan by applying to a bank. Basically, anyone who is of legal age and therefore fully capable of business and residing in Germany can do that. Whether the bank ultimately approves the loan depends on a few criteria and cannot be answered generally.
Basically, there is nothing to be said against trying to get a loan when in doubt. However, it should be noted that you do not overdo it with the inquiries, because every inquiry is recorded electronically in the Credit Bureau and saved for one year.
When to get a loan
Anyone who has a good credit rating and is therefore creditworthy from the bank’s point of view can get a loan. You have to keep in mind that the bank always has the aim of avoiding default on your part and, in case of doubt, rejects the application rather than approving it.
For example, let’s assume that you are employed, have a gross income of $ 2,800, have no other credit and no negative entries in the Credit Bureau. In this case, there is a very high probability that the loan will be granted to you.
Of course, it also depends on the purpose for which you need a loan. For example, if it is a small loan up to a maximum of $ 10,000, then you would most likely always get it, provided there are no negative features. However, if you want to finance a property, it may still be that despite good creditworthiness, the income is not sufficient to finance this amount.
When you don’t get a loan
There is no general answer to when you will not get a loan. However, you can assume that you will not get a loan if the following criteria apply.
- Negative Credit Bureau entry
- Temporary employment
- No regular income
A common misconception is that too much parallel credit is also a negative criterion. This may be true in individual cases, but not always. Many entrepreneurs and investors have multiple loans. It is always crucial whether you can service all loans. If that is the case, then you are a welcome customer at the bank; after all, credit is the main business of most banks. If, on the other hand, there has been a default on a loan, the chances of getting another loan are very poor.
If you are not creditworthy yourself, you can specify a second borrower or a guarantor. This increases security for the bank and improves your chances. However, it should be noted that both the 2nd borrower and the guarantor are creditworthy.
As everywhere, there are exceptions, namely when you want to repay a loan. In the case of debt restructuring, for example, you shift the debt from 3 loans to just one loan from a new bank. If the bank is informed that you are not taking out the 4th loan but are planning to use it to repay the 3 other loans, then the chances of approval are also very good. However, it would have to be checked in advance whether the other loans can be redeemed early.
How Much Credit Can I Get?
The maximum amount of your loan can depend on your income and long-term collateral. But also for what purpose you want to use the loan.
For example, if you take out a car loan, the chance of approval is much higher and the bank will not check your income situation in every detail. There is also a reason for this, because if the bank fails to pay, the car is requested as security and may be sold. The risk is therefore much more manageable for the bank. The same applies to a property. If a real estate loan is not serviced, the bank can auction the house.
Other loans, such as consumer credit, are a higher risk for the bank, because in the event of a failure to pay, you cannot claim anything. Whether you get such a loan now largely depends on your income and future collateral.
Banks have a kind of “due diligence” when granting loans, but whether you can really afford the loan, you have to decide for yourself and think carefully in advance. Unfortunately, loans have often led to overindebtedness.
Sample calculation of a possible loan
Let us assume that you have a net income of $ 2,000. Your monthly fixed costs for rent, cars, groceries, pension schemes, savings, internet & mobile communications, etc. are $ 1,300. You therefore have a budget surplus of $ 700.
At first, such a budget surplus looks very good. But you not only have your fixed costs, you also want to go out to eat, visit a musical, go on a weekend trip, etc. This means that you should now simply take out a loan at a rate of $ 700.
A general recommendation would be deducted from this by 20% as security. Then you come to $ 560, which you could raise monthly for a loan. With this amount, you could finance, for example, a $ 19,000 loan over 36 months.
Of course, these are only theoretical calculations and examples. The practice usually looks different. Therefore, always take some time to calculate your personal financial situation. After all, you want to work not only to pay your loan, but also to get something out of life.
Do I get a credit from negative Credit Bureau?
If you have a negative Credit Bureau entry, you are very unlikely to get a loan from a bank. Here you fall straight through the grid during an examination. With negative Credit Bureau entries, a distinction is also made according to the respective degree of hardness.
For example, if you have not paid for your cell phone contract or that of the fitness studio, then this is not as hard as the “Account in process” entry, which means that the bank has canceled and made an account or loan for you. It is also crucial whether the entry is still marked as “open” or as “completed”.
But there are also alternatives such as loans without Credit Bureau, in which case the bank does not ask Credit Bureau for the credit check. However, this does not mean that you do not have to prove creditworthiness. However, banks often request proof of income. You will also not find a German bank that works on this principle. As a German, you can also get loans in Luxembourg or Switzerland.
Another alternative is a loan from private individuals. Either through a private loan agreement with a friend who doesn’t care about your Credit Bureau entry, or through a provider such as Fine bank, for example. This provider specializes in brokering loans from private to private. There not only one person finances your loan, but several private investors share the risk.