Get Credit in Germany

How to get a loan in Germany as an Expat

Do you want to buy a new car in Germany, furnish your apartment, reschedule existing loans or fulfill a special wish? Then you could get a loan. In this article, we would like to give you some facts about loans in Germany and show you an ingenious way you can compare credit conditions and get the best deal. In addition, we explain how and where you can apply for the SCHUFA self-report. Have fun reading!

Can Foreigners Get a Loan In Germany?

Yes, anyone who meets the following requirements can apply for a loan in Germany.

To be eligible for a loan, you must be of legal age, live in Germany, and have a German bank account. In addition, the banks themselves attach other conditions to loans. For example, most banks require customers of loans to have a certain income and secure employment. Your work contract shouldn’t be fixed for a limited time, and you should no longer be in your probation period. If your job is temporary, you can generally only apply for a loan if the loan term ends before your employment contract expires. A favorable credit report from Schufa is also one of the usual requirements for loan approvals.

How do German banks rate my creditworthiness?

Whether a bank will grant you a loan depends primarily on your creditworthiness. The bank checks your income, and a permanent position with a regular salary is a must-have for a loan application in most cases. Self-employed and freelancers prove their solvency through balance sheets and income statements. In addition, the Schufa score is also used to assess creditworthiness.

Exceptional loan opportunities for certain occupational groups, e.g., civil servants, students, or the self-employed, are also available.

What is the Schufa score?

schufa in Germany

SCHUFA collects and provides credit information. You’ll receive a negative entry in your Schufa file if you don’t pay your bills.
You can monitor your Schufa score by regularly obtaining a self-report, and you can get one free every year. However, it doesn’t contain detailed information and only generally states if you are a safe credit partner. But please remember that whether you can get a loan depends on your bank’s decision. So even a good Schufa score is no guarantee for a loan.

You can easily book a detailed report from the SCHUFA online in only a few clicks for 29.95 €!

How much debt can I afford?

loan in Germany
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The maximum amount you should borrow from the bank depends on how high your monthly repayment and interest rate are. The prices must be within your financial means, and you can determine this based on your budget calculation. Compare your regular income (i.e., your net income) with your everyday expenses.

Expenses include rent, insurance, electricity and heating bills, and food. And don’t forget to consider your clothing, phone and maybe hobbies costs. You may also want to put aside money for emergencies, buy a new car or computer or go on a holiday. After such a calculation, you’ll see how much you have left for installment payments. It would help if you always had a financial buffer for unexpected costs.

The monthly interest rate can later be used to limit the possible loan amount and possible terms. With a loan calculator from Check24 or DKB, you can determine the monthly interest rate to be paid based on the period, loan amount, and interest.

What documents do I need to apply for a loan?

In addition to the signed contract, banks often require additional documents from you:

  • Bank statements for the last two to three months
  • A payslip or wage statement
  • A current pension statement for pensioners
  • A salary statement for civil servants
  • At least one income tax statement for self-employed persons and, as a rule,
  • An income surplus calculation and business assessment.

Earmarked loans may require additional documentation, such as the registration certificate part II for a car loan or a signed security transfer. A power of attorney is required for a debt restructuring.

When can I expect the money in my account?

Depending on the selected loan, the waiting time for payment may vary. As a rule, the money is in your account after a few days and ready for disbursement. If you take out an instant or lightning loan, you can expect payment on the next business day – depending on the loan term; an instant loan can even be credited to your account on the same day.

5 Tips for Getting A Good Loan In Germany

#1 The APR – annual percentage rate

When comparing loans, you should pay particular attention to the APR. At this rate, the bank includes all costs associated with the conclusion of the financing, and the loan interest is not. Therefore, the real interest rate is the crucial figure showing all borrowing costs customers incur when taking out a loan. The only exception is the voluntary residual debt insurance.

Some loans are granted at a flat rate; others have a creditworthiness-dependent interest rate. If an interest rate spread is shown in the loan comparison, it is a creditworthiness-dependent interest rate. The effective interest rate you pay for this type of loan varies within the indicated minimum and maximum interest rates. The bank decides the interest rate you obtain a loan only after an initial credit check. Before asking for personal loan terms, you can use the so-called two-thirds rate to navigate such offers. It is the highest interest rate that at least two-thirds of customers pay for the loan.

#2 Additional unscheduled repayments

When comparing loans, don’t just pay attention to interest rates. It’s also valuable to have the necessary flexibility in repayment. For example, free unscheduled repayments offer a great way to save on loan interest. After all, you only pay interest on the outstanding loan amount, and the faster you repay, the less interest you pay. Free unscheduled repayments are usually only offered within a particular framework and are generally limited to a maximum number within a certain period. On the other hand, some banks offer free unscheduled repayments without restrictions. You can repay any amount of the loan at any time.

get credit in Germany
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However, if no free unscheduled repayments are planned on loans taken out, banks can impose so-called early repayment penalties for this. In addition to unscheduled repayments, installment repayments offer greater repayment flexibility. Interrupting loan installments can be very useful in the event of unforeseen expenses. Some banks allow you to pause installments for free, while other institutions charge a fee.

#3 Choose the duration and monthly rate

Before taking out a loan, remember to check your budget. Determine your fixed monthly costs and the regular variable costs. And don’t forget to consider yearly expenses, such as specific insurances that only go out once a year or annual taxes, like for your car. Also, set some money aside for unexpected costs. You can use whatever you have left over from this budgeting for loans.

You’ll probably already know how much money you want to lend from a bank. On comparison sites online, you can enter how many months you intend to repay the amount. The faster you pay back your loan, the less interest you pay. However, the rates per month are higher that way. So you’ll need to look at how it fits best for your budget.

#4 – Applying for a joint loan

A loan does not have to be applied for alone. Including another lender in the application can benefit your interest rate and increase the bank’s probability of approving the loan.

In this case, the lender’s joined creditworthiness improves the interest rate. Together you have a higher yearly income, which means more significant safety for the bank. However, these advantages usually only apply if the second applicant also has a regular income.

Taking out a joint loan means you’re both equally liable for ensuring the repayment of the monthly rates.

#5 – Would you like a loan insurance?

There is also so-called residual debt insurance for some loans, called payment protection insurance (RSV) or residual credit insurance (RKV). Such are voluntary insurances that pay out loan installments in the event of unemployment, disability, or sudden death. However, it also incurs additional costs.

Therefore, you should consider beforehand whether you want this protection. For example, existing endowment or pension insurance policies can also be used for this purpose. If you decide to take out residual debt insurance for your loan, it is essential to explicitly check what the insurance covers. Often these kinds of insurances aren’t as straightforward as they sound. So read the fine print.

Why is it beneficial to specify an intended use with your credit loan?

Good to know: 

Banks sometimes will grant you excellent interest rates for a loan if the bank classes it as a secure investment. Houses and cars, for example, usually get the best interest rates.
Therefore you can specify the intended use to ensure the best deal for you. Remember, you can only use the money for that purpose. Please speak with your bank to find out how they can support the investment you plan.

Debt rescheduling in Germany

Rescheduling existing loans can be worthwhile for various reasons. For example, credit costs can often be reduced, or installments can be adjusted to changing life circumstances. Consumers who manage multiple loans can combine them into one loan, which helps them better assess their financial situation. When you refinance your debt, you usually have to sign a power of attorney that allows the new bank to pay off the old loan.

loan for a car
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Car financing in Germany

If you’re planning to buy a car, motor home, or motorcycle, you can benefit from more favorable interest rates. In most cases, they remain the bank’s property until the loan is paid off. The vehicle is additional security for the bank.

Compared to dealer financing, consumers can usually get a cheaper vehicle by getting a discount on cash payments through auto loans.

Modernization loans for real estate in Germany

Banks are often very favorable towards homeowners. Suppose you would like to lend money for modernizing or remodeling your home. You’re likely to get a loan. Any investment that heightens the value of your real estate is classed as good security because if you can’t pay your debt, the bank gets a valuable property. Maybe you’d like to install solar panels or insulate your roof? Loans are usually earmarked for a specific purpose and have reasonable interest rates.

In Germany, you can receive government subsidies from the KfW bank for any measures that increase energy savings in your home. Banks can only grant modernization loans to property owners.

loan coparison germany

How to find the best loan rates in Germany

#1 CHECK24 – Loan comparison at top terms

  • CHECK24 gives you an overview of the entire lender market. With comparison, you can be sure to find a suitable loan under the best conditions.
  • At CHECK24, you can choose the loan amount depending on the desired purchase.
  • With the credit calculator of Check24, you can determine the monthly interest rate to be paid based on the term, loan amount, and interest.
  • The comparison platform allows you to conclude a loan from the comfort of your home. It can do everything online and quickly with a digital identification process.
  • At CHECK24, your Schufa credit score is secondary. The loans are Schufa-neutral, and at the same time, the request is non-binding.
  • On CHECK24, you can submit a non-binding credit request to several institutions simultaneously, increasing your financing request’s likelihood of receiving a loan offer. 
  • After making a non-binding loan request, you can get free advice to find the perfect offer for you.
  • To send the required standard documents quickly and easily to your bank, you can connect once on CHECK24 to your bank account to retrieve your bank statement online. All you need is your usual online banking data; the connections are encrypted and TÜV-approved.

Tip: If you have a connected bank account, you will receive lower interest rates on average! The account statement is also available subsequently in digital form.

#2 DKB – Top loan conditions

get loan in Germany with DKB

If you already know what loan you want, take advantage of the excellent loan conditions at the DK Bank!

Annual and debit interest rates at DKB

With the DKB Privatkredit, Deutsche Kreditbank offers classic installment loans with flexible terms, regardless of the type of use. There are loans with a net amount of 2,500 to 65,000 euros and a term of 12 to 120 months.

The banks allow all common financing reasons for the intended use – such as starting a business or rescheduling another loan – except for real estate financing and refinancing.

For this purpose, DKB offers its own real estate financing under particular conditions.

The amount of the APR and the fixed borrowing rate depend on the loan term and are more favorable for active online banking customers. Freelancers and self-employed persons are excluded from this arrangement.

Depending on the situation, the APR is between 3.09% and 3.79%; the fixed borrowing rate is between 3.05% and 3.73%.

What is the DKB instant credit loan?

Borrowers can also obtain flexible installment loans from DKB, which can be decided and disbursed immediately without submitting any documents. They submit a loan application online, authenticate themselves with VideoIdent and confirm the contract with a digital signature. The same conditions apply to the instant loan as to the personal loan, except that the possible net loan amount is between 2,500 and 15,000 euros. Free unscheduled repayments are still possible.

get loan in Germany
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How does real estate financing work at DKB?

DKB’s real estate financing is designed for real estate purchases, land purchases, new buildings, modernizations, follow-up financing, and financing occasions for raising funds for real estate loans. The minimum loan amount at DKB is 20,000 euros. Fixed interest rates of between 5 and 20 years can be agreed upon, and the minimum repayment is 2%.

The possible unscheduled repayment amount depends on the specific loan agreement (annuity loan, vario loan, or KfW loan).

Who can get a credit loan from DKB?

  • Lenders who want to apply for a DKB loan must:
  • Be at least 18 years old. 
  • act in their own financial interest
  • have a residence in Germany
  • Have a permanent job (with a few exceptions, such as self-employed or freelance pharmacists, but doctors and DKB existing customers are excluded).

Conclusion: applying for a loan in Germany 

Whether it makes sense to take out a loan or not is always a personal choice. Take the time to compare offers and weigh your options. If you then find a loan is what you want and have the means for repayment, choose a bank.