Loans in Germany, All You Need To Know:

Find out how to get money fast in 15 minutes with this type of credit. We help you to easily find out how they work, the best current offers of mini-credits and what to take into account to hire them.

This is how you proceed

A loan is borrowed money that can be quite expensive for you. The best loan is therefore the one you don’t take out in the first place. That’s why we give you tips on how to avoid it.

You can find the right loan with our loan comparison. It will lead you to the credit portals we recommend.

How expensive can a loan be?

Our loan calculator shows you which loan amount, term and instalment amount suits you and what this means for the interest costs. The data will help you find the best loan on comparison portals.

How much credit can you afford?

Think carefully about how much money you can put into the loan each month. A high rate ensures that you pay off the loan faster and that you don’t pay as much interest to the bank. But it’s no use if you can’t afford the instalments and therefore slip into overdraft. In addition, you have to deal with unforeseen financial problems while you are paying off the loan. If you are unsure, it is better to lower your instalment a little.

For whom is a loan a sensible solution?

Loans can make a lot of things possible: the new car for the commute, the dream wedding including a honeymoon in the Caribbean or the latest flat-screen TV. Or quite boring: the rescheduling of another, more expensive loan.

But before you go to the bank with such wishes, you should ask yourself: Is a loan the right way to go? If the answer is “yes”, there are a few things you need to consider to make sure everything works out and you don’t pay too much for the loan.

Whether you get a loan at all depends on your financial and professional situation. As a rule of thumb, the more secure your job and the higher your income, the better your credit rating.

Avoid loans for purchases if possible

It is sometimes impossible to plan purchases in such a long-term way that the money for them is completely available in your account. But every loan is only a kind of advance from the bank. You have to pay for it with interest. And not only that. If something goes completely wrong in your life, the loan quickly turns into a debt problem.

That’s why we give you tips on how you can improve your financial situation. In the best case, you can avoid a loan altogether. Or at least you can afford a higher instalment.

How to improve your financial situation

This is what you can do This is how you proceed:

Postpone the purchase for a few months and pay the planned monthly instalments into a call money account. This way you can test whether you can handle paying that much extra money each month. You’ll also be saving money already – so you won’t have to borrow as much later on.

Compare prices on price portals, you will always get discounts. If there is a cheaper model, think about whether it is enough for you. You can always save a few euros on smartphones if you buy a previous model, for example. Haggling and negotiating can also help you.

If you have more money in your current account or call money account than you need as an emergency reserve, use it to reduce the loan amount. This way you pay less interest.

Borrow money from elsewhere You don’t necessarily have to borrow money from a bank; friends and family can also give you loans. They may not charge you interest, which makes it cheaper for you. But remember to draw up a loan agreement.
If the dealer not only offers you a good deal, but also zero-percent financing, you may save money. Be aware of the pitfalls of this type of financing.

If it has to be a loan, you should take the time to go through your current contracts. You can save money in many areas, such as electricity, gas, mobile phone contracts and insurance.

If you can do this before you take out a loan, you will have more money to pay the instalments. If that doesn’t work, it’s not so bad. You can put the money into the loan later and pay it off faster. We will explain exactly how to do this further down in the text.

Be sure to check loans for refinancing

If you are paying off an old, expensive instalment loan or if your current account is in the red more often and for longer periods of time, you should try to reschedule. As a rule, this is easy.

You can pay off an existing instalment loan in full at any time, either with your own money or with a new, cheaper loan. Your bank may charge you a fee for this, but it will not exceed 1 per cent of the money you still owe. If the loan only runs for twelve months or less, it is only 0.5 percent of the remaining debt.

For example, if you still owe 10,000 euros, the bank may demand a maximum of 100 euros when you pay off the loan. But you can recoup these 100 euros if the interest rate at the new bank is only 1 percent lower.

At the moment, interest rates are quite low. This means that in most cases refinancing is worthwhile if

• you have an older loan
• Your financial situation has improved
• You are also paying for an expensive residual debt insurance policy.

It is quite simple to see why rescheduling is worthwhile:

The interest rates on older loans are usually even higher.
If you earn more in the meantime, the banks assume that you can better handle the loan. This reduces their risk – and the interest for you.

Residual debt insurance costs a lot and can do little. If you cancel the loan, you also get rid of the insurance and the unnecessary costs.

To give you a better idea of when it pays to reschedule, we have written a guide on how you can reduce your credit costs. There you will also find examples of calculations in which we explain everything in detail and in which you will also find a few examples of calculations.

By the way, you can also balance your overdraft with a loan. But you’d better be careful: You’ll quickly lose the advantage of the debt rescheduling if you overdraw your current account again. Tips on this and what you can do if your bank cancels your overdraft facility can be found in the guide to rescheduling overdraft facilities.

It’s easier for employees, harder for the self-employed

Banks only grant loans if they assume that they will get the money back. That’s why they check the professional and financial situation of everyone who applies for a loan very carefully. Employees who have had a permanent job for years or civil servants in the public sector have better chances than young entrepreneurs or job starters with a fixed-term contract.

It is particularly difficult for the self-employed to obtain a loan; this applies both to commercial loans and to loans for private purchases. One way out may be a personal loan. Personal loans are also available through credit portals. The difference: instead of banks, other consumers advance the money. However, the interest rates are often higher than for normal loans.

How does a loan work?

You can only find out what your chances are of getting a favourable loan when you submit a loan application. The best way to do this is via a credit portal. Further down in the text, we show you what you have to look out for. But to help you assess what you can afford, we will first explain how a loan actually works.

The instalment loan rate, term and interest rate are fixed from the outset.
With an instalment loan, the bank pays out the loan in one amount. You know from the beginning what the loan will look like in detail; changes are only made in certain exceptions.

These points are fixed:

• the amount of the fixed monthly instalment
  how long you will repay your debt
  how high the interest rate is

By the way, the term of your loan is usually agreed for full years, but it is almost always given in months, for example 36 or 48 months.

There may be changes if you put more money into the loan than you had originally planned or if you have to skip an instalment because your finances are worse at the moment.

How to determine the loan amount, instalment and term

You can always calculate a loan in two ways: First you can determine how much money you need, and then you can specify how many months you want to repay the loan in. The loan calculators on the comparison portals will then show you how high the monthly instalment will be at a certain interest rate.

However, this procedure tempts you to simply extend the term if the rate seems too high. The more months you take to repay the loan, the lower the monthly instalment. However, you will then pay more interest overall.

It is better if you first decide on a certain monthly instalment and then decide how long the loan should run. The result is the loan amount you can afford. If this amount is too low, you should not stretch the credit, but think again about whether the purchase can be made more cheaply.

Where can you find the best instalment loan?

You can find the right loan by comparing many loan offers. You won’t be able to do this on your own, after all there are many banks. Comparison portals help here. They don’t have all the banks linked to their comparisons, but they have more than you could ask for yourself. In addition, they negotiate special conditions with some banks, so you might get the loan cheaper from this portal.

However, it can happen that not all connected banks are shown on a portal in the credit comparison. This may be for technical reasons or at the bank’s request.

By the way, when comparing offers, don’t be fooled by the first interest rate list on the portals. You will only get a real offer after you have entered your personal data.

Of course, the first thing you can do is ask your bank or another local bank what a loan would cost there. As a rule, however, an instalment loan is more expensive in a bank branch than on the internet. This is due to the low-cost procedures that are possible with online loans: The prospective borrower fills out the forms online himself; the bank does not have to pay an employee to do it.

If you still don’t want to rely on the portals alone, you can also contact other banks (such as your local bank).

Before you compare:

We have put together a few tips for you to ensure that the comparison process gives you good results and that you get through it quickly:

If you still have some time before you need the loan: Check your Schufa record. You can do this free of charge with the so-called data copy. If there are any errors, contact Schufa and they will have to correct them. If you need the loan quickly, however, this won’t work.

Set up an email address just for the credit search. As soon as you have made a request, you will receive numerous emails with offers and information. A separate email address will help you keep track of everything.

Before comparing, gather all the information and make a list. Then you can quickly copy the data into the respective portal.
The portals ask for more than name, address and date of birth. They need more information, for example:

• Name and address of employer
• Start of current employment
• monthly income
• other income such as child benefit
• details of various expenses (rent, insurance, maintenance obligations, loans already taken out)

What happens during the loan term?

The credit relationship between you and the bank begins with the disbursement. It ends when you have paid the last instalment. A lot can happen between now and then.

Pay off the loan quickly if you can still find money. You should put extra money, such as a bonus or an inheritance, into the loan. This will shorten the loan term. You have two options: Either you pay in more money outside of the actual instalment, which is called unscheduled repayment. Or you pay off the loan completely.

If you want to pay more, your bank must allow such unscheduled repayments. Whether or not this is the case is written in your contract. As a rule, this does not reduce the amount of the instalments, it only shortens the term. The financial burden remains the same, but the total cost of the loan is lower.

When you repay the loan in full, the bank is entitled to compensation of 0.5 to 1 percent of the remaining amount. Some banks waive this early repayment fee.

Talk to the bank if things get tight. If you are unable to pay your instalment, contact your bank directly. Don’t take too long, otherwise you might get a reminder and your bank won’t be very willing to negotiate. Your bank can lower your monthly payment or even defer it altogether. The loan will be expensive, but you have averted the first hassle.

Remember: You have given your bank collateral: With most loan agreements, you sign that your wages can be garnished. You should not let it come to that.

About this page, our methodology

What this page is for: our goal is to help you get the best financing for your needs. Therefore, here we explain you what credits with payday guarantee are, how you can compare them to know which one suits you and which offers are the most attractive right now.

Source: the information regarding the main characteristics of payday loans and their current regulation comes from Law 16/2011 on consumer credit contracts 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 FUNDGECKO: we are an online comparator specialized in personal finance and home economics products. Here you can, in addition to comparing the conditions of all offers, find quality information that will help you identify the payday loans that best suit your needs.

Note: the services we offer are totally free for the user, as FUNDGECKO obtains its income from advertising and its featured products.