Banks Germany

Credit Loan in Germany

Are you a foreigner and looking to get a loan in Germany? It may be a small loan to furnish your new apartment after moving to Germany, or a big loan to buy a car or a house in Germany. This article provides all the basic information you need to know about getting a credit loan in German, the types of loans in Germany, the requirements of getting a loan and other alternate ways to obtain a loan even if you have no credit score in Germany.

Types of Credit Loans in German

There are different types of credit available in Germany depending on the purpose of requiring the credit. The main types of credit loans are:

1. RatenKredit – Installment Loans i.e Personal Loan with variable monthly payment
2. RahmenKredit – Personal credit loan with a fixed monthly payment
3. AutoKredit – Loan for buying a Car, Car Loans for auto financing in Germany. Read more about How to get a Car loan in Germany.
4. Wohnungskredit  (Immobilien)- Credit for a Home, Home Loan or House  Mortgage Loan
5. SofortKredit – Instant Credit

Requirements for getting a Credit Loan in Germany

Germany is a credit conservative country and does not offer credit loan easily unless you meet some basic requirements. Therefore in order to obtain a credit loan in Germany from a bank, you will have to meet at least the following requirements:

1. A good SCHUFA score., i.e good credit rating. Learn more about how to keep a good Schufa credit rating here.
2. A residence permit (preferably permanant), or at least a resident permit or Visa that covers the entire period of the loan
3. Regular and stable income. You should be able to provide your salary slips. If you are a freelancer you can show your previous year tax returns and regular monthly billing. If you get regular work from a single client, you can ask the company to write that you might be getting regular work from them and the possible amount you will earn from them.

If you have the above conditions, you can try for a loan in Germany from a bank, which usually has a lower interest rate. However, do not be disappointed since you can also get credit loans from other institutions if you do not have the above requirement, but with a little bit higher interest rate.

Types of institutions which provide credit loan in Germany

There are different institutions which provide loans in Germany. Depending on the institution, the rate of interest changes.

1.  Credit loan from Banks in Germany

The first option is to try the bank you are using for a loan. Normally, they provide credit with the lowest interest rate and easier documentation as they know the client. Sometimes, you can also use other securities (stocks, fixed deposits) with the same bank as collateral for a favourable interest rate

However, this comes at a cost. You will have to show a very good credit rating and a stable income. For this, you would have to be living in Germany for at least a couple of years and should have a permanent residence permit or one with a long validity period. Examples are the Sparkasse banks, Volksbank etc.

• Lowest interest rate for Home loans
• Provides larger loan with a longer repayment period
• Requires good credit score
• Usually 2 to 4 per cent interest for long-term house loans

2. Loan from Credit Institutions in Germany

They provide easier credit than the banks and most of them are online. However, the fees are usually higher than the Banks. some examples of such credit institutions in Germany are Barclays Credit or EasyCredit.

• Low-interest rate for small and short term loans
• Especially for personal loans with small loan amount with faster payment terms
• Requires a decent credit score
• usually between 4 to 10 per cent interest on short-term loans.

3. Peer-to-Peer lending providers in Germany

They are mainly websites which provide an interface between lenders and borrowers. In some cases, the investors just invest in the website which then selects the people who may borrow. This can be an option for foreigners who have not been in Germany for a long time but need a credit loan in Germany. They have a high-interest rate depends on the credit score. Therefore, if you have a decent credit score you can get a loan with a lower interest rate compared to someone with a negative credit score. Examples of peer-to-peer lending systems are Smava, and Lendico.

• High interest rate
• For personal loans with with no or negative SCHUFA score
• Can also get credit with a lower credit score
• usually between 3 to 14 percent interest on short term loans.

4. Mini Loans

It is good financial practice to have an emergency fund saved up which covers at least 3 months of your expenses. But, we understand that time might be tough and sometimes you might end up living paycheck to paycheck. First advice is to ask your family or friends, but when living abroad it might not be possible.

These loans are short-term loans to meet an urgent requirement which cannot wait till your next paycheck. Sometimes also called payday loans, they usually run for a month or two and are for very small amounts. It is also more lenient with credit score. But, the interest rates are very high and can go as high as credit card rates of 15 per cent. So, only use this as a last resort and always pay on time.

• Immediate loans
• Short duration (as small as 1 month)
• Small loan amounts, normally €500 and a maximum of up to €1500.
• Also for lower credit score
• High-interest rate

Credit Requests

There is a difference between checking for loan condition when shopping around and applying for a loan.

When shopping for loans, make sure that you are only making a conditional request (Konditionen Anfrage). This request will only be visible to you and not be to the others. So the other banks will not know you are shopping around.

Do not apply for a loan using the hard credit request (Kredit Anfrage). This request will remain on your credit report as a request which others can see. This will affects your credit score. Even when it comes time to apply for the loan, do not apply for more than one loan at a time.

To keep a track of your requests, register for an online account with SCHUFA.

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