Although the willingness to get a loan in Germany is increasing every year, only 15,5% of Germans have an installment loan. The three most popular reasons people in Germany get a loan are purchasing a car, a house or apartment, or refinancing previous loans. If you find yourself in need of a loan while living in Germany, this guide will help you understand your chances of getting a loan, what types of loans exist, and how to best apply for a loan.
Can foreigners get a loan in Germany?
Yes, as a foreigner, you are able to get a personal loan in Germany when you fulfill the following requirements:
- Older than 18 years
- Resident in Germany
- Able to show regular and sufficient income
- Good SCHUFA score (credit worthiness)
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Depending on the type of loan you are applying for, there will be more criteria a bank or financial institution will look at. Additionally, we must point out that the chances of getting a loan granted are also closely related to your resident status. If you have not achieved permanent residency yet, you are automatically linked to a higher risk of paying the loan back in full.
To increase your chances of getting a loan in Germany as an expat, be sure to only inquire for loans with a repayment period that lies fully within the duration of your residence permit. If you are looking at getting a mortgage, your best chance is to wait until you hold a settlement permit.
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Types of loans in Germany
There are various types of loans in Germany. These are the most popular ones for private use.
Installment loan (Ratenkredit): The most common type of loan, which you pay back with fixed monthly installments. This is an unsecured loan with free disposal and no collateral backing the debt. Therefore the loan solely relies on your creditworthiness.
Car loan (Autokredit): This is a fixed installment loan, just as above, however, solely to buy a car. Therefore, it is a secured loan with lower interest rates, as the car is considered an asset backing the debt.
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Instant loan (Sofortkredit): These are unsecured loans paid out to you, usually within a couple of days. The credit volume is usually lower than with an installment loan, and interest rates may be higher.
Mortgage (Hypothek, Immobilienkredit, or Baufinanzierung): A secured loan only for the purpose of buying, building, or sometimes renovating a house or apartment.
Overdraft credit (Dispositionskredit or short Dispo): This usually comes with your checking account without a previous application. Most banks set an overdraft limit with a fixed interest rate.
Debt conversion (Umschuldungskredit): This loan allows you to combine several smaller loans into one and refinance it through a possibly lower interest rate.
How to get a loan in Germany?
The good old-fashioned way of asking your bank for a loan is definitely possible in Germany, provided you are with a bank that offers loans.
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However, there are more modern, better, faster, and cheaper options available nowadays. Please be aware that when looking for loans, you only ask for a loan conditions inquiry (Kreditkonditionen Anfrage), which will not impact your SCHUFA score and won’t be visible to other banks. An actual loan request (Kredit Anfrage), however, will be marked in your SCHUFA record and can impact your credit score.
Let’s take a look at the possibilities depending on the type of loan you are looking for.
Installment loan (Ratenkredit) & Car loan (Autokredit)
Verivox is only available in German; however, when using Chrome as a browser, right-click and select ‘translate page to English’.
You can choose the type of loan and the conditions needed; up to 100.000 euros with a duration of up to 10 years are possible. Verivox compares various banks, highlighting possible features such as a digital contract, same-day payout, possibility of repayment breaks, monthly payback rate, and possible interest rate, and gives you access to the results directly. All inquiries via Verivox are SCHUFA-neutral, as they are loan conditions inquiries.
With Finanzcheck on the other hand you can also select the type of loan and the conditions you need; up to 150.000 euros with a duration of up to 10 years are possible. However, as a next step, you need to answer several questions, such as how much rent you pay and whether you own a car, to customize the suggested loan offers as much as possible to your living standards.
Finally, you will need to provide your contact details and you will receive the individualized loan offers selected from over 20 banks via email. Of course, these are also Schufa neutral.
The benefit of Finanzcheck is that you can also seek a personal phone consultation in English, should you have questions regarding the various offers.
When comparing interest rates, be sure always to compare the annual percentage rate (effektiver Jahreszins), as unlike the nominal interest rate (Sollzins), it also includes the processing fee and other costs.
Instant loan (Sofortkredit)
If you are in need of a quick loan in Germany, you can refer to Cashper, a highly rated financial online service. With Caspher, you can request a loan of up to 1.500 euros with a duration of 30 or 60 days. At the time of writing, they even offer the 30-day duration as an interest-free loan!
Even though the website is in German, it is super simple to use. The request is also SCHUFA neutral, and you know instantly whether your mini loan is approved or not. The following standard payout takes up to 10 days. If you need the money urgently, you can get it within 24 hours for an extra fee.
Mortgage (Hypothek, Immobilienkredit or Baufinanzierung)
Very few people in Germany are able to buy a house or a flat without getting a mortgage, which is one reason why Germany is more of a property-rental than a property-owning nation. However, owning a house remains a dream for many (Germans and expats alike). A mortgage is probably one of the most complex loans to get, as so many individual factors get taken into account.
Luckily, Hypofriend was founded some years back, which offers digital, hassle-free mortgage services fully in English! They are highly rated and fully free for you to use. So if you are looking to get a house loan in Germany, don’t do it without using their services!
- Fast & simple to use
- 100% free, in English and digital
- Comparison of over 750 banks
- Financial mortgage & property advice from A-Z
- Free property search and real market valuation
Crowdfunded peer-to-peer loans
As an alternative to getting a loan from a bank, crowdfunded loans are getting more popular in Germany. You do not borrow money from one bank with such a system, but instead from multiple private people, who invest their money in you for higher interest rates than leaving the money in a savings account.
Auxmoney is one of Germany’s biggest private loan service providers, offering loans up to 50.000 euros. The main advantages for getting a peer-to-peer loan are:
- Allows loans even with lower SCHUFA scores
- Usually faster and less bureaucratic processing
- Great for people with fewer chances to get a bank loan (freelancers, apprentices, employees within their probation period)
- Loans with a lower SCHUFA score possible
- Private loans are usually less bureaucratic than bank loans
- Good alternative for freelancers, apprentices, employees within their probation period
5 tips for getting a good loan in Germany
Here are five tips on how to proceed to get a good loan in Germany.
1. Check your SCHUFA score
Your creditworthiness plays a big role in your quest to get a loan in Germany. To better evaluate your chances and cost, know your SCHUFA score and, if necessary, take measures to improve it. We have written a detailed guide on how to achieve this.
2. Choose the correct loan type
As described above, there are different types of loans in Germany. If you qualify for a secured loan because you use it to buy collateral or securities, such as a car or a house, apply for a loan for that specific category, as it will have lower interest rates.
3. Take a loan together with another person
If possible, try to apply for a loan with another person, e.g., your spouse, as it reduces the risk for the bank or lender and results in lower interest rates.
4. Choose the loan amount and duration realistically
Calculate the loan amount and duration so that you will be able to handle the payback rate without needing a second loan or impacting your day-to-day life.
5. Compare different loan offers
As we have highlighted in this guide, it is best to compare loans. Don’t just take the first offer your bank provides. Always look at the annual percentage rate when comparing loans.
Helpful German vocabulary related to loans
Here are some words you will come across frequently when looking into loans in Germany.
Kredit Anfrage – Loan request
Kreditkonditionen Anfrage – Loan conditions request
Laufzeit – Loan duration
Bonität – Creditworthiness
Zinsen – Interest rate
Sollzins – Nominal Interest on debt
Eff. Zins p.a. (Effektiver Jahreszins) – APR annual percentage rate
Raten / Tilgung – Installments
Umschuldung – Debt conversion / refinancing
We hope this guide has given you actionable steps on how to get a loan in Germany, especially as a foreigner. Please be advised that we are not financial consultants, and getting a loan should not be an impulsive decision. Be sure to use the various loan calculators provided by the mentioned companies to evaluate your financial situation and your possibility of paying back the loan in full before signing any contract.
We wish you the best of luck with your life plans in Germany!