Secure a Loan Successfully: Strategies for Obtaining Favorable Loan Terms

In Germany, applying for a loan has become a straightforward process, thanks to the convenience of online applications and the variety of options available. Here's a comprehensive guide on how to apply for a loan, from specifying the loan's purpose to repaying it.

1. Specifying a Purpose for the Loan

Specifying a specific purpose for the loan can lead to lower interest rates. For instance, renovation loans and car loans can benefit from lower interest rates because the property or vehicle serves as security.

2. Eligibility

A loan can be applied for even if the applicant is a retiree, trainee, freelancer, or student, as long as they have a regular income with which they can repay the loan within the agreed term.

3. Creditworthiness Check

At certain foreign banks, you can obtain a loan despite a negative SCHUFA rating. However, you should expect higher interest rates and be aware of the risk of encountering an unscrupulous provider. Ensure that there are no additional costs involved, such as for sending documents or checking your application.

However, a loan without SCHUFA is not possible with a German bank. German banks are legally required to always check the creditworthiness of the applicant before granting a loan. This also includes obtaining information from a credit agency like SCHUFA.

4. Maximum Loan Amount

The maximum loan amount according to the rule of thumb is 10-15 times your monthly net income. For example, at a monthly net income of 1,500 €, the maximum loan amount is 15,000-22,500 €.

5. Applying for a Loan Online

To apply for a loan online, enter the loan amount, purpose, and repayment period in an online form, provide further personal and financial information, choose an offer, and apply for the loan. Every third installment loan is concluded online, and 8% of all new loans are concluded entirely online.

6. Types of Loans

A classical installment loan is a loan with a fixed repayment amount and a fixed interest rate. The loan costs for a 84-month loan with a 5.89% effective annual interest rate are 2,165.72 € for a 10,000 € loan, 4,330.64 € for a 20,000 € loan, and 6,459.63 € for a 30,000 € loan.

7. Residual Debt Insurance

Residual debt insurance secures the repayment of the loan if the borrower becomes unemployed or unable to work, but it increases loan costs. On average, 28% of installment loan users have taken out residual debt insurance in the last 10 years.

8. Application Process

The steps to apply for a loan online in Germany typically are:

Fill out the online application form on the lender’s website, providing personal details, desired loan amount, purpose, and financial information.
Choose the type of loan you want (e.g., personal loan, car loan).
Upload required documents such as your salary slips, valid ID (passport or identity card), credit report (SCHUFA), and possibly pension certificates. These verify your identity and creditworthiness.
Submit your application with an online signature to confirm your details and consent.
Wait for approval. The lender reviews your application and, if approved, transfers the approved loan amount to your bank account, often within 24 hours.

Important notes:

Accuracy and completeness in the application are crucial to avoid rejection.
Loan approval depends on your financial situation, stay period in Germany, and credit score.
Online loan comparison platforms can help you find suitable offers.
Short-term or payday loans may have different requirements and quicker processes but are generally for smaller amounts and come with specific conditions.

This process is consistent across various lenders including traditional banks and online platforms in Germany. You can also apply for a loan by visiting a bank in person or on their website, using an installment loan comparison to compare offers from multiple banks.

9. Importance of Checking Your SCHUFA Data

It can be beneficial to check your own SCHUFA data with a free SCHUFA self-disclosure once a year - and especially before applying for a loan. If you notice any errors, SCHUFA must correct them.

Interest rates can be significantly higher than the examples provided, up to around 12%. The requirements for credit applications can vary from bank to bank, especially for freelancers or self-employed professionals, who may need to provide additional documents such as an income and expenditure account or a business assessment. Always use the effective interest rate for comparison as it includes all costs.