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Loans & Credits in Germany

Applying for a loan in Germany should not be particularly different to other countries. However, there are certain things you should look out for and of course the German terminology for loans and credits.

Sources for loans in Germany could be your personal bank, such as

or you could choose an online provider, such as

German credit options

Reasons for taking out a loan or getting quick credit

You might need to pay a larger amount of money for some unforeseen expenses, for example your car needs a repair, your computer breaks or you need an additional car for your spouse who just got a job. 

There can be plenty of good reasons why you need a loan at this very moment. However, you need to be sure that you are able to repay that loan and that you have sufficient future cash flows. Otherwise, that loan will just get you into a spiral of interest fees and more loans. 

Try to avoid loans for entertainment or consumption, such as going on vacation or getting a new TV. These expenses are not productive, i.e. they will not help you to pay back the money you borrowed. On the other hand, buying a car for your spouse could be very productive: Your spouse might now be able to get to work without a car and could not earn money without a car. With that new car, he or she can take the job and with the salary you will be able to pay back the credit in the future. 

financial planning

Alternatives for loans or credits

Before you sign a multi-year loan agreement with interest fees, consider some alternatives before you actually take out a loan:

  • Ask friends and family
  • Use your line of credit from your bank account or credit card
  • Try to defer the expenses
  • Use all funds you can make available from other accounts
  • Ask your employer for a loan or an advancement

These options could decrease the amount of your loan or save you interest expenses. The line of credit of your bank account or credit card can be a convenient option for smaller short-term expenses. For long-term loans it could be too expensive due to the high interest rates.

What to look out for when applying for a loan in Germany

The four most important elements of a loan are

  • credit volume (Kreditvolumen),
  • lent term (Kreditlaufzeit),
  • instalment amount (Kreditrate) and
  • interest rate (Zins).

These elements are interconnected and can influence each other. If you choose a longer lent term, you will pay smaller monthly instalments but end up paying more in interest. The credit volume can also influence the interest rate you are given. Additionally, the purpose of your loan is also important: loans for buying a house are usually cheaper than loans for buying a car. 

Where to get credit in Germany

Your personal bank will usually be able to give you a loan, but these loans are often more expensive that other options. Online loans have become increasingly popular and offer better rates and smaller fees, as they do not have to pay for a local office branch and branch employees. A lot of the credit application is automated: Algorithms in the background will calculated your individual credit risk and decide on your creditworthiness within seconds. 

It is definitely good idea to compare some online offers, especially for smaller short-term loans. 

euros bill Germany

How easy is it to get a loan in Germany?

It depends on your employment situation if you will be approved for a loan and for how much. State-employed workers usually have no problems when applying for credit. It is much more difficult for young graduate with limited-time employment contracts and for self-employed consultants or business owners. 

Each time you apply for a loan in Germany, the bank or financial service provider will do a background check on you. This background check shows your financial situation, such as your monthly income, the amount of credit cards you have and the amount of different bank accounts. It also shows how often you have changed your registered address in the past, how often you have applied for a loan and many other things. Based on these criteria, the bank will decide on your creditworthiness and approve or decline your credit application. This background check can also be a factor to the interest rate you are given and the credit volume.