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Further Below: Our Guide To Loans in Austria, covering everything you need to know.
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What Is a Loan?
A loan is a sum of money borrowed from a lender with the understanding that it will be repaid over time, typically with interest. Loans enable individuals to access funds they might not have upfront, allowing them to achieve financial objectives promptly.
Different Types of Loans in Austria: Exploring Your Options
Austria offers a range of loan types, each catering to specific needs. Familiarizing yourself with these options will help you choose the right fit for your circumstances. Some common loan types in Austria include:
Personal Loan (Persönlicher Kredit): The personal loan is a versatile choice for various purposes, from consolidating debts to funding a vacation. With fixed interest rates and flexible terms, this unsecured loan provides quick access to funds without requiring collateral.
Mortgage Loan (Hypothekendarlehen): For those seeking homeownership, the mortgage loan is a key contender.
It offers a substantial amount for purchasing real estate, with the property itself serving as collateral. Mortgage loans come with competitive interest rates and extended repayment periods.
Car Loan (Autokredit) An Autokredit is tailored for purchasing vehicles, both new and used. With fixed interest rates and a predefined repayment plan, this loan ensures you can hit the road in your desired vehicle without straining your finances.
Student Loan (Studienkredit): Austria prioritizes education, making the Studienkredit indispensable for students. Designed to cover tuition fees, living costs, and educational supplies, this loan eases the financial burden of pursuing higher education.
Business Loan (Geschäftsdarlehen): Entrepreneurs and business owners can access capital through Geschäftsdarlehen. These loans support various business needs, including startup funding, expansion initiatives, and working capital requirements.
Renovation Loan (Renovierungskredit): For individuals looking to upgrade their homes, the Renovierungskredit provides funds specifically for renovation and refurbishment projects. This loan enables homeowners to enhance the value and comfort of their properties.
Overdraft Facility (Kontokorrentkredit): An overdraft facility offers a line of credit linked to your bank account. It allows you to withdraw more than your account balance, up to a specified limit. While convenient, interest rates on overdrafts can be higher than other loans.
Consumer Goods Loan (Konsumgüterdarlehen): This loan is tailored for purchasing consumer goods like appliances, electronics, and furniture. With manageable installment plans, acquiring essential items’s a practical way without depleting savings.
Vacation Loan (Urlaubskredit): For those dreaming of a getaway, the Urlaubskredit provides funds to finance your vacation. It’s a short-term loan with a specific repayment period, helping you create memorable experiences.
Emergency Loan (Notfallkredit): Life’s unexpected emergencies can be financially challenging. The Notfallkredit offers a quick solution to cover urgent expenses, providing peace of mind during unforeseen situations.
Green Loan (Grüner Kredit): Austria’s commitment to sustainability is reflected in the Grüner Kredit. This loan encourages eco-friendly initiatives, such as energy-efficient home upgrades and environmentally conscious projects.
Medical Loan (Medizinischer Kredit): Healthcare expenses can be substantial. The Medizinischer Kredit addresses medical bills, treatments, and procedures, ensuring you can prioritize your health without financial stress.
Wedding Loan (Hochzeitskredit): For couples planning their special day, the Hochzeitskredit offers funds to cover wedding expenses, making your celebration as memorable as possible.
When Should I or Should Not Get a Loan?
Before diving into loan applications, evaluating whether a loan is the right choice for your situation is crucial. Consider the following table to help determine whether a loan aligns with your needs:
|Situation||Should Get a Loan||Shouldn’t Get a Loan|
|Urgent Medical Expenses||✅ To cover necessary medical treatments||❌ For non-essential or cosmetic procedures|
|Higher Education||✅ To invest in valuable education||❌ For unrelated luxury expenses|
|Home Purchase||✅ To buy a primary residence||❌ For speculative real estate ventures|
|Business Expansion||✅ To scale and grow a profitable business||❌ For high-risk ventures without planning|
|Debt Consolidation||✅ To combine high-interest debts||❌ To postpone addressing underlying issues|
|Emergencies||✅ To handle unexpected urgent situations||❌ For impulsive purchases or luxuries|
|Home Renovation||✅ For necessary home repairs/improvements||❌ For extravagant renovations|
|Vehicle Purchase||✅ To buy a reliable mode of transportation||❌ For a luxury vehicle beyond your means|
|Wedding Expenses||✅ To manage wedding costs responsibly||❌ For excessive, over-the-top celebrations|
|Travel or Vacation||✅ For a well-planned, budgeted vacation||❌ For an extravagant vacation without planning|
|Investment Opportunities||✅ For well-researched, potential growth||❌ For speculative, high-risk investments|
|Technology Upgrades||✅ To enhance productivity or career growth||❌ For unnecessary gadgets or trends|
What to Look Out for When Picking a Loan in Austria?
The right loan can help you achieve your goals while minimizing unnecessary financial burden. To make an informed choice, here are essential aspects to keep in mind when selecting a loan:
- Interest Rates: Interest rates directly impact the cost of borrowing. Compare the offered interest rates across different lenders and loan types. Lower rates can significantly reduce the total amount you’ll repay over the loan term.
- Fees and Charges: In addition to interest rates, be mindful of any fees or charges associated with the loan. These can include processing fees, origination fees, and prepayment penalties. Understanding these costs ensures you’re aware of the total financial commitment.
- Repayment Terms: Evaluate the loan’s repayment terms, including the length of the loan and the frequency of payments. Longer loan terms may result in lower monthly payments but higher overall interest costs. Shorter terms lead to higher monthly payments but lower overall interest expenses.
- Collateral Requirements: Some loans, like mortgages, may require collateral (such as the property being purchased) to secure the loan. Understand the collateral requirements and the potential consequences of defaulting on payments.
- Fixed vs. Variable Rates: Loans can have fixed or variable interest rates. Fixed interest rates remain consistent over the entire loan duration, ensuring a predictable monthly payment structure.
Variable rates can fluctuate based on market conditions, which can lead to payment uncertainty.
- Total Cost of Borrowing: Calculate the total cost of borrowing, including both principal and interest payments. Comparing this across different loan options will give you a clearer picture of the financial commitment.
- Early Repayment Options: Check whether the lender allows early repayment without penalties. Being able to pay off the loan ahead of schedule can save you money on interest.
- Credit Score Impact: Understand how applying for a loan may affect your credit score. Multiple loan applications within a short period can lower your credit score, potentially impacting future borrowing opportunities.
- Lender Reputation: Choose a reputable lender with a track record of transparent practices and good customer service. Research online reviews and consider recommendations from trusted sources.
- Debt-to-Income Ratio: Your debt-to-income ratio (DTI) is a crucial metric lenders use to assess your ability to manage new debt.
The calculation involves dividing your monthly debt payments by your monthly income. A lower DTI ratio signifies a healthier financial standing and increases your likelihood of loan approval.
- Loan Purpose Alignment: Ensure that the loan you’re considering aligns with your specific purpose. For example, if you’re seeking a car loan, make sure the loan terms are suitable for purchasing a vehicle.
How to Qualify for a Loan in Austria?
Securing a loan in Austria involves meeting specific eligibility criteria set by lenders. These criteria serve as indicators of your ability to repay the loan.
Understanding what lenders look for can greatly enhance your chances of approval. Here’s what you need to know about qualifying for a loan in Austria:
- Credit History: Your credit history plays a crucial role in loan approval. Lenders assess your credit report to gauge your past repayment behavior.
A strong credit history with timely payments and a low utilization rate indicates financial responsibility and enhances your eligibility for favorable loan terms.
- Income and Employment: Lenders want assurance that you have a stable income to cover loan repayments. They typically require proof of steady employment, such as recent pay stubs or tax returns.
Your income should demonstrate your capacity to manage additional debt without straining your finances. A consistent employment history signals stability and a reliable income source.
Lenders may inquire about your job tenure and changes in employment over the past years.
- Debt-to-Income Ratio (DTI): The debt-to-income ratio (DTI) is a pivotal metric. It’s calculated by dividing your monthly debt obligations (such, existing loan payments, credit card minimums, and other debts) by your monthly income.
Lenders prefer a lower DTI, reflecting a healthier financial position and the ability to manage new debt responsibly.
- Age and Residency: In Austria, the legal age for obtaining a loan is typically 18. Additionally, some lenders may require you to be a permanent resident or have a certain period of residency to qualify for certain loan types.
- Loan Purpose: Different loans have specific purposes. Ensuring that your intended use aligns with the loan type strengthens your application. For instance, if you’re applying for a mortgage loan, the funds must be used for purchasing real estate.
- Co-Signers or Guarantors: If your credit history or financial situation doesn’t meet the lender’s requirements, having a co-signer or guarantor with a stronger financial profile can enhance your loan application’s viability.
- Required Documentation: Be prepared to provide documentation to support your loan application. This may include proof of identity, proof of income, employment history, and residence details.
- Loan Amount and Terms: The loan amount and terms you’re requesting also impact eligibility. Lenders may have specific criteria for different loan amounts, and your ability to meet the monthly payment obligations for the chosen term is crucial.
How Can Fundgecko Help You Find the Best Loan in Austria?
Fundgecko can play a pivotal role in helping individuals secure the best loan tailored to their specific needs.
We offer a platform to compare various loan options from different lenders and select the most appropriate one for your needs.
Fundgecko generates personalized loan recommendations that align with your unique situation, ensuring you’re presented with the most relevant options.
What Documents Should I Have Ready to Present?
When applying for a loan in Austria, ensure you have the following documents ready:
- Proof of Identity: A valid passport, driver’s license, or national ID card.
- Proof of Income: Lenders need to evaluate your ability to repay the loan, which is why you’ll need to provide proof of income. This can include recent pay stubs, income tax returns, or employment contracts.
- Proof of Residence: Verify your current address with utility bills, rental agreements, or official government correspondence. Proof of residence confirms your stability and contact information.
- Employment History: Providing a detailed employment history demonstrates your work stability and financial reliability. Include information about your current and past employers, positions, and employment duration.
- Credit History Report: Some lenders may require your credit report, which outlines your credit history, outstanding debts, and payment behavior. A positive credit report can improve your loan terms.
In Austria, the local credit system, including credit reporting agencies like Kreditschutzverband von 1870 (KSV1870), plays a pivotal role in providing credit history reports to lenders and individuals.
Contact KSV1870 or other reputable credit reporting agencies in Austria to request your credit history report.
- Financial Statements: If you’re applying for a business or entrepreneurial loan, financial statements detailing your company’s revenue, expenses, and profits may be necessary.
- Collateral Information: For loans requiring collateral, such as mortgage loans, documentation related to the collateral (property, vehicle, etc.) will be essential.
- Loan Purpose Explanation: A concise statement explaining the purpose of the loan can provide context to the lender, enhancing your application’s credibility.
- Personal References: Some lenders may request personal references who can vouch for your character and financial responsibility.
- Tax Returns: If you’re self-employed or have additional sources of income, tax returns can validate your financial stability and capacity to repay.
- Bank Statements: Recent bank statements provide insight into your financial transactions, cash flow, and savings.
- Other Loan Documentation: If you’re refinancing or consolidating existing loans, having documentation related to those loans can be beneficial.
How Can I Improve My Chances of Getting a Loan in Austria?
To enhance your likelihood of loan approval, take the following steps:
- Maintain a Healthy Credit Score: Austria’s credit reporting agencies, like KSV1870, play a crucial role in assessing your creditworthiness.
Regularly checking your credit score helps you track your financial standing and identify areas for improvement. Consistent and timely payments, responsible credit utilization, and minimizing outstanding debts can positively impact your credit score.
- Review Your Credit Report: Credit reports provided by agencies like KSV1870 offer a detailed overview of your credit history.
Regularly review your report to ensure accuracy and address any discrepancies promptly. This proactive step demonstrates your commitment to maintaining a credible financial profile.
- Manage Existing Debts: Lenders evaluate your debt-to-income ratio (DTI) to determine your ability to handle additional debt.
Lowering existing debts through regular payments and responsible financial management can improve your DTI ratio, making you a more attractive candidate for loans.
- Responsible Credit Usage: Prudent credit use is a key aspect of loan approval. Keep credit card balances reasonable and maintain a low credit utilization ratio. Responsible credit behavior signals your financial responsibility.
- Strategic Loan Terms: Tailor your loan terms to align with your financial capacity. While shorter loan terms result in higher monthly payments, they also lead to lower overall interest costs.
Opt for terms that suit your budget without straining your finances.
- Gather Necessary Documentation: Compile all required documents, including proof of income, identification, and proof of residence.
Being organized streamlines the application process and demonstrates your commitment to responsible financial management.
- Seek Professional Guidance: Financial advisors and credit counselors can offer personalized advice on improving your credit score and financial health. Their insights can help you navigate the complexities of loan applications.
A Step-by-Step Guide on How to Get the Best Loan in Austria
1. Define Your Loan Purpose: Identify why you need the loan. Whether it’s for a home purchase, education, or a major expense, clarifying your purpose will guide your loan search.
2. Assess Your Financial Situation: Evaluate your income, expenses, and existing debts. Understanding your financial capacity helps you determine the loan amount you can comfortably manage.
3. Check Your Credit Score: Obtain your credit score from credit reporting agencies like KSV1870. A higher credit score enhances your eligibility for favorable loan terms.
4. Research Loan Types: Explore the variety of loan types available in Austria, such as personal loans, mortgages, and auto loans. Understand the features, terms, and requirements of each option.
5. Compare Lenders: Research different lenders, including traditional banks and online lenders. Analyze interest rates, fees, and customer feedback to discover a trustworthy and cost-effective choice.
6. Calculate Total Loan Costs: Use loan calculators to estimate the total cost of borrowing, including interest and fees. This helps you make an informed decision about the financial commitment.
7. Prequalify for Loans: Some lenders offer prequalification, allowing you to see potential loan offers without affecting your credit score.
8. Gather Documentation: Collect necessary documents such as proof of income, identification, and residence. Having these ready speeds up the application process.
9. Submit Loan Application: Submit your loan application with the chosen lender. To prevent delays, make sure your submission is accurate and complete.
10. Review Loan Terms: Carefully review the loan terms offered, including interest rates, repayment period, and any associated fees. Seek clarity on any unclear points.
11. Negotiate if Necessary: Feel free to engage in negotiations with the lender to secure improved terms, particularly if your credit history is robust.
12. Accept the Loan Offer: Once the terms meet your approval, proceed to accept the loan offer, ensuring thorough comprehension of the agreement prior to affixing your signature.
13. Complete Necessary Paperwork: Provide any additional documentation requested by the lender to finalize the loan approval process.
14. Receive Funds and Repay: Once the loan is approved, the funds will be disbursed to you. Make sure to adhere to the repayment schedule to maintain a positive credit history.
15. Monitor Your Loan: Regularly track your loan status and payments. Staying proactive ensures you’re on top of your financial obligations.
Loan Cost Calculation Example for a Loan in Austria
Let’s take a practical example of calculating the monthly EMI (Equated Monthly Installment) for a personal loan in Austria.
- Loan Amount: €10,000
- Interest Rate: 8% per annum
- Loan Tenure: 3 years (36 months)
EMI = [P x R x (1+R)^N] / [(1+R)^N – 1]
- P = Principal loan amount (€10,000)
- R = Monthly interest rate (annual interest rate divided by 12 and then by 100)
- N = Total number of monthly payments (36 months)
- Monthly Interest Rate (R) = (8 / 12) / 100 = 0.0067
- Number of Monthly Payments (N) = 36
- EMI = [€10,000 x 0.0067 x (1+0.0067)^36] / [(1+0.0067)^36 – 1]
- EMI = [€10,000 x 0.0067 x 1.287090] / 0.287090
- EMI ≈ €313.36
In this example, the estimated monthly EMI for a €10,000 personal loan at an 8% annual interest rate over a 3-year tenure would be approximately €313.36. This calculation includes both principal and interest components and provides a clear idea of your monthly financial commitment.
Where to Get Loans in Austria?
You can explore loan options through various channels:
Well-established banks like Raiffeisen Bank, Erste Bank, and Bank Austria offer a wide range of loan products, including personal loans, mortgages, and business loans.
Credit unions, often community-based, provide loans with favorable terms to their members. These institutions emphasize local support and collaboration.
Digital banking has given rise to online lenders like Smava, N26, and Santander Consumer Bank. These platforms offer convenience and often competitive rates for various loan types.
For home loans and mortgages, mortgage brokers can guide you through the complexities of the real estate market and connect you with suitable lenders.
Loan comparison websites and financial marketplaces aggregate offers from multiple lenders, enabling borrowers to compare terms and make informed choices.
Cooperative banks emphasize community ties and personalized service. They offer an array of financial services, encompassing loans among other offerings.
Credit Card Companies
Credit card issuers offer credit to cardholders, serving as a form of unsecured loan. However, credit card interest rates can be higher than traditional loans.
Peer-to-Peer Lending Platforms
Peer-to-peer lending platforms connect borrowers with individual investors willing to lend money, offering unique borrowing opportunities and competitive rates.
Building societies specialize in housing-related loans, such as home savings contracts and mortgage loans.
Some lenders focus on specific loan types, like auto loans or education loans, offering tailored solutions to address specific needs.
Austrian government initiatives provide support for specific types of loans, such as homebuyer assistance programs and student loans.
Certain non-profit organizations and foundations offer loans for specific purposes, such as education or community development.
Acquiring a loan in Austria is a significant financial decision that requires careful consideration. By understanding loan types, eligibility criteria, and the application process, you can confidently navigate the loan landscape and make informed choices.
Remember, seeking advice from financial experts and utilizing platforms like Fundgecko can simplify the process and help you secure the best loan to achieve your aspirations.
Frequently Asked Questions
1. What minimum credit score is required to qualify for a loan in Austria?
The minimum credit score required to qualify for a loan in Austria is not a fixed universal value and can indeed vary significantly based on a couple of important factors: the lending institution and the specific type of loan you’re applying for.
Generally, a higher credit score does increase your likelihood of approval and favorable loan terms. However, lenders take a holistic approach to assessing your financial situation. They consider multiple factors to gauge your creditworthiness and ability to repay the loan.
These factors may include your credit history, income stability, debt-to-income ratio, employment history, and the loan amount relative to your financial capacity.
2. How long does the loan approval process take in Austria?
The loan approval timeline can vary depending on the lender and the complexity of the loan application. Online lenders might generally offer faster processing times compared to traditional banks.
On average, it could take anywhere from a few days to a few weeks for your loan to be approved and funds disbursed.
3. Can I get a loan in Austria as a non-resident or expatriate?
Yes, non-residents and expatriates can often apply for loans in Austria, but the eligibility criteria may differ. Some lenders might require additional documentation to verify your financial stability and repayment capacity.
4. Are there any government-backed loan programs in Austria?
Yes, Austria offers various government-backed loan programs to support specific purposes, such as housing, education, and business development.
These programs often come with favorable terms and conditions, and eligibility requirements vary based on the program’s focus.
5. Can I pay off my loan early without penalties in Austria?
Austrian law generally allows borrowers to pay off their loans early without incurring penalties.
However, it’s advisable to review the terms and conditions of your loan agreement to ensure there are no prepayment penalties or additional fees associated with early repayment.
Glossary for Austria loan terminology
|German Term||English translation|
|Allgemeine Bedingungen||General terms and conditions|
|Antragsgebühr, Erwerbsgebühr||Application fee: the fee charged by a lender to cover costs associated with processing the loan|
|Anzahl der Kinder mit Anspruch auf Kindergeld||Number of children entitled to child benefits|
|Arbeitslosigkeit||Unemployment, job loss|
|Arbeitsunfähigkeit||Sick leave, disability|
|Art des Wohnsitzes||Residence type|
|Auskunftei, SCHUFA||Credit agency, In Germany, your creditworthiness is most likely tracked and recorded by Schufa Holding AG, Germany’s biggest credit agency|
|Automatische Zahlung von Rechnungen||Automatic bill payment|
|Bankverbindung||Bank account, bank details|
|Berufliche Beziehung||Professional relationship|
|Bürge||A guarantor is someone who promises to make sure you repay the loan completely. Lenders ask for guarantors when your credit history isn’t good enough. If this happens, the guarantor is legally responsible for paying back the loan|
|Dauer||Duration of employment|
|Duración||Tenure of the loan|
|Einzulösende Verpflichtungen Dritter||Third-party obligations to be redeemed|
|Erste Tranche zahlbar am||First installment payable on|
|Fester Sollzinssatz||Fixed debit rate|
|Gesichertes Darlehen||Secured loan|
|Gewünschte Frist||Life/period of a loan|
|Gewünschtes Darlehen||Loan desired|
|Höhe des Darlehensbetrags||Loan amount|
|Jährlicher effektiver Zinssatz||Effective annual interest rate|
|Kleines Darlehen||Small loan|
|Kreditlinie||Line of credit, official document that shows the rules for a personal loan|
|Kreditwürdigkeit||Credit history, financial standing|
|Lombardkredit, Garantien, Sicherheiten||Lombard loan, guarantees, collateral(asset that backs your loan)|
|Nichtbezahlung, Zahlungsverzug||Non-payment, delinquency|
|Nichtzahlung, Zahlungsverzug, Verzugszinsen||Non-payment, late payment, interest on arrears|
|Option Deckung||Option on Payment protection/ insurance|
|Persönliche Daten||Personal data|
|Persönliches Darlehen, Ungesichertes Darlehen||Personal Loan, unsecured loan|
|Professionelle Daten||Professional Data|
|Ratenschutzversicherung||Payment protection insurance|
|Solvenz||Solvency, a credit score is an individual’s valuation and ability to repay a loan|
|System der sozialen Sicherheit||Social security system|
|Tod, Unfall, Arbeitsunfähigkeit, Arbeitslosigkeit (Wartezeit von 3 Monaten (außer Tod durch Unfall))||Death, accident, incapacity for work, unemployment (waiting period of 3 months (except death due to accident))|
|Umschuldung||Rescheduling of debt|
|Unterzeichneter Vertrag||Signed contract|
|Variable Zinsen||Variable interest rate|
|Verpflichtung zur Vorlage von Nachweisen||Obligation to provide evidence|
|Zahlung in Raten||Payment in installments|
About this page, our methodology
About this page: we are passionate about helping you get the best financing that best addresses your needs. We, therefore, marshal the best available information about consumer credits and how to compare the options to end up with the most attractive offer right now.
Source: the information regarding the main characteristics of loans in Austria and their current regulation comes from the World Bank statistics, among other reference portals.
Methodology: The data relating to the conditions of these products (amount, term, interest, etc.) have been obtained through online research and consultation of the official statistics of the aforementioned reference sources.
About Us: Fundgecko is an online comparison website specialized in personal finance and home economics products. We help our users to not only compare the available financial products in the market but also provide rich information that will shorten the decision-making process and help them end up with the best offer.
Note: the services we offer are totally free for the user, as Fundgecko obtains its income from advertising and its featured products.