Online loans in Germany
Loans are in their simplest form an agreement between a lender and a borrower about the loan terms. The lender has the funds available and borrows them under specific criteria, often through an interest rate of some sort and some additional fees. This is considered the payment for borrowing the money and is paid back monthly, quarterly, biannually, or annually by the one who borrowed the money. As the agreement is made, certain aspects like amount, runtime (how long the period for returning the money is), and interest rate must be set. This is often done by banks to consumers, where banks have the funds available to them and lend them to their customers under a specific contract.
For an amount of 100,000 €, over a runtime of 8 years (96 months), with an interest rate of 7%. With fees included, the final repayment for this loan is around 140,000 €. However, this amount is split over 96 terms (months), with a monthly payment of 1377 € (fees included).
Usually, you would need to consult a local bank to sign up for a loan, but as online banking has become more and more popular, there are several lenders offering convenient fast credit in Germany.
While most traditional banks require a thorough investigation of your financial standpoint regarding monthly income, budgets, last year’s spending and much more, online banks only require minimum information, which makes them more accessible. Some online lenders might also offer lower interest rates since they are not burdened by paying rent for a physical subsidiary in the area.
Why Moneezy?
Moneezy is here to make finding a loan in Germany easier and more straightforward. With over 15 years of experience in the financial sector, we understand that navigating the world of loans can be confusing. That's why we offer a transparent and easy-to-use comparison platform where you can explore different loan options from trusted lenders. Whatever your specific needs are, Moneezy helps you find an option that fits your financial situation. Our goal is to provide you with clear information so you can make informed decisions, saving both time and money in the process.
How to get a loan in Germany
To apply for a loan in Germany, you must fulfil the following requirements:
Be over 18 years old. Some banks also have a maximum age of usually 65 years, since this is the age at which the residual debt insurance ends.
Have your main place of residence in Germany as well as a German bank account
Have a stable income source. Banks offer loans on the basis of getting back the money after the runtime has passed. If you have no income source, you cannot pay back your loan with the added interest, which in turn means you will not be able to take a loan in the first place.
Good credit score. Most banks perform a credit check by checking the “Schufa score”, which tracks your financial behaviour and assesses your credit score.
Here is an overview of the loans offered by online lenders in Germany, which you can also find right here on Moneezy:
Classic loans
Consumer Loans (Verbraucherkredit), Private Loans (Privatkredit), Quick Loans (Sofortkredit), Mini Loan (Minikredit),and Unsecured Personal Loans (Kredit ohne Sicherheit) are the four different loans that follow the classic loan structure in Germany. You apply for a loan of a certain amount, as well as decide on runtime for paying it back with the added interest and fees. The different terms are mainly used to distinguish between small and big loans.
These loans can be used for a lot of different things. The smaller loans can be used for an unexpected expense that has come through, an emergency that must be taken care of, or invested in an item you've wanted for years. A quick loan in Germany might then be a convenient option for you.
The bigger consumer loans are more suited towards initiating start-ups, loans for property or vehicles, as well as energy optimization or renovations in your home. The possibilities are endless, which is why the consumer loan is the most common loan.
If you're facing a short-term financial need, a mini loan in Germany might be the perfect solution. These loans are designed to cover smaller expenses or emergencies and typically have shorter repayment terms.
For those in need of immediate funds, an instant loan in Germany offers a quick and convenient solution. These loans are processed rapidly, often with approval and fund disbursement occurring within the same day.
The speed at which you can receive funds from an online loan in Germany varies depending on the lender and their processing times. Some online lenders are capable of disbursing funds within a few hours to one business day after your application is approved, particularly if the loan application process is entirely digital. However, in other cases, it might take a couple of days, especially if additional verification steps are required. It’s advisable to check with the specific lender about their disbursement timelines to get a clear idea of when you can expect to receive the money.
Special loans
Consolidation Loans (Konsolidierungskredit) is a term for combining several smaller loans into one big loan, to avoid paying huge interest for several loans at a time.
Consolidation loans are especially useful when consumers have taken several small loans and are now burdened with several payment dates and different interest rates.
Lastly, we have Overdraft (Überziehungskredit), which allows you to exceed the amount of money in your account by a set amount each month, without paying the normal fees.
Overdrafts are especially useful when conducting a big project, for example, a house renovation, where unexpected expenses can come out of nowhere. The loan is only active if your account experiences an overdraft and the loan will cover the rest of your expenses. Once next month’s paycheck comes in, the loan is automatically paid off with a small interest rate.
The Pros and Cons of Loans in Germany
More than 10 years of experience in the financial factors have taught us a lot about loans in Germany. Let's look at the positives and negatives of such loans, so you can decide whether borrowing money is right for you in your situation and what kind of loan currently suits your needs.
Loans that suit your situation
Allows you to realize your projects
Transparency throughout the entire process
No loan justification
Convenient and flexible
Lifestyle inflation, where you spend more money because you have more money
Debt, if you are not careful with your budget
Reckless spending
Extra fees if you do not comply with payment dates
Overall, payday loans in Germany, as well as consumer loans, and other similar loan products can be a good option to get extra cash in situations, where it is better to pay for your expense immediately.
However, if you are not realistic and thorough in your planning of budgets in connection with your loans, you can end up having trouble paying them back over time. Furthermore, if you apply for a loan to spend on devaluating assets such as technology, fashion, and trends, you are not looking at investments, but rather at reckless spending, something to avoid using loans for.
Applying for multiple loans in a short period can negatively impact your credit score, known as your SCHUFA score in Germany. Each time you apply for a loan, the lender conducts a credit check, which is recorded in your SCHUFA report. Multiple loan applications within a brief period can be seen as a sign of financial distress or an increased risk of default, which can lower your credit score. A lower SCHUFA score can make it more difficult to obtain loans in the future or result in higher interest rates. It is advisable to space out loan applications and only apply for credit when necessary to avoid negatively affecting your credit score.
Being mindful and intentional about your loans is the most important aspect. But if you keep these risks in mind when applying for a loan, they can be a great source to realize projects.
What to do when you cannot pay your loan back
If you are having trouble with paying back your loan, you can look for help by turning to:
Your lender - they might offer a debt counselor's service
Your local social welfare office
If you experience trouble with paying your loan back, it is best to seek advice as early as possible, so you can start getting back on track early on.
Remember, that Moneezy does not offer financial advice or debt counseling services.
Repaying a loan early can sometimes lead to penalties or fees, depending on the lender's terms and conditions. In Germany, many lenders charge an early repayment fee, also known as a prepayment penalty, which compensates them for the interest they lose when the loan is paid off ahead of schedule. This fee is typically a percentage of the remaining balance or a set amount. However, some lenders offer loans without such penalties, especially in more competitive loan markets. It is essential to read the loan contract carefully or ask the lender directly about any potential charges for early repayment before committing to the loan.
Our experiences related to German loans
The German loan market has developed a lot in the past years. New lenders are constantly popping up, which might make it confusing to choose one for you.
Research and Compare: There are many lenders, which means that they offer sometimes deals for both new and existing customers. Find the right loan for your needs and do not choose the first random lender, but choose one with the most advantageous terms.
Understand the Total Cost: Look beyond the interest rate and consider the total cost of borrowing. This includes additional fees, such as processing fees, insurance, and early repayment penalties.
Check Your Credit Score: In Germany, lenders often consider credit scores (SCHUFA) when evaluating loan applications. It is important to review your SCHUFA report and address any inaccuracies or negative entries before applying for a loan.
Compare lenders and choose the best one for you, since there are a lot of lenders in the German loan market.
And always remember that all loans are financial obligations and must be paid back.
