Taking out a loan: making sense of financing – tips and advice

Taking out a loan: Financing guide

When urgent repairs need to be paid, unexpectedly high bills flutter into the house or an investment is to be made, a cash injection is often necessary. For such situations financial institutions provide loans for financing. But what types of credit there are? And how to find the right loan for you? What to consider when applying for a loan? This and more we show in our guide to financing and loans.

Advisor: Taking out a loan and financing sensibly

What types of loans are there?

There are situations in life when you urgently need money, z.B. to finance a new e-bike or car or for the purchase of a new heating system or gas boiler. Necessary purchases cannot always be financed from savings. Sometimes one may simply want to fulfill a dream, z.B. finance an expensive trip. Or, in order to cope with an extraordinary situation, sums are required in the short term that exceed the company's own liquid funds. In such cases you should deal with the issue of credit.

What is a loan?

The credit agreement is first of all a legal transaction. Here, a person borrows a certain amount of money from another person or a bank. The details of the transaction are regulated in the credit agreement. Here, for example, it is about the amount of interest that must be paid for the loan. The period in which the loan must be repaid is also determined.

In many cases, repayment installments to be transferred monthly are fixed. It is also determined what happens if one or more installments are not paid (on time). The fees that must be paid when taking out a loan are also shown. Thus, the borrower and the lender have certainty when they enter into a loan agreement. All details must of course be regulated within the framework of the permissible legislation.

What types of credit are there?

The universal credit
In the case of a universal credit, the borrower can dispose of the credit amount as he wishes. This means that the granting of the loan is not tied to the fact that the sum for certain items z.B. must be spent on the budget. This is different, for example, with a car loan with which you want to finance a new car. Here, the financed vehicle serves as collateral in most cases. Therefore, the car title remains in the hands of the bank until the loan amount is repaid in full.

This is not the case with the universal credit *.

You can use this as you wish. You can fulfill one or another wish or even think about rescheduling previous expensive loans. So you can save a lot of money in the future. So universal credit means that you get the money paid out at your free disposal. The disbursement of the loan amount is not tied to a specific use. Therefore, it may be that the interest rates in the case are somewhat higher.

The installment loan or annuity loan
In the case of an installment loan, the exact amount of money ("installment") that must be repaid each month is fixed. The rate includes repayment and interest. The lower the interest rate, the greater the repayment and vice versa. If a larger sum has already been repaid, the interest within the monthly installment takes a smaller and smaller space. Finally, you will have to pay only for the remaining credit. At the end of the credit term, therefore, the repayment becomes larger and larger.

If you want to take out an installment loan, z.B. to finance an apartment or a house purchase, you can calculate in advance exactly what monthly installment you have to pay. For this it is necessary that you know the loan amount and the interest to be paid. So you can determine what credit you can really afford. You should make sure that, in addition to repaying the loan, you have enough money left over for living expenses and other expenses. Thus, the borrower does not run the risk of overindebtedness.

Installment credit is given, for example, when you get a home loan. Motor vehicles such as a car, motorcycle or eScooter are also usually financed through an installment loan. The borrower knows exactly what monthly installment to pay when taking out a certain amount of credit over a given period of time. Therefore, this form of credit is very plannable and clear.

The framework credit
With a framework credit a certain sum is made available. However, the borrower does not have to pay this in full. For example, he can also have only part of the sum paid out. Interest must then only be paid on the amount that has already been paid out. The repayment of the loan amount is usually flexible. Only the interest on the amount already borrowed is paid. The borrower can arrange the repayment at will. Thus, the framework loan offers great flexibility. If only the interest is paid, the monthly payment is not high. If you need more money, you can possibly have the credit line increased.

A common special form of the framework credit is the granted credit limit with a credit card. Here you as a customer are largely free to decide what amount – within the limit of course – you want to use, and at what intervals and in what amounts you want to repay. Of course, it is important to observe the applicable deadlines so as not to run the risk of increased interest on arrears.

It also pays to make an informed choice when it comes to credit cards: After all, some providers advertise that they do not charge an annual card fee, and other providers additionally grant a bonus for new customers. Caution is required in particular with the offered possibilities for the repayment. Who the monthly credit card statement is not 100% z.B. pays by direct debit, must expect high credit card interest on the remaining balance. With credit cards such as the Barclays VISA or the Hanseatic Bank GenialCard, repayment is possible up to 100%.

The overdraft facility
If you have a current account with a bank, you are usually granted an overdraft facility when you receive a regular income. In most cases, the overdraft facility is granted in the amount of two to three net salaries. Of course, there are differences between the individual banks.

You often have to pay high interest rates for the overdraft facility. If the account is permanently overdrawn, you should therefore consider replacing the overdraft facility with another loan with lower interest rates.

The mini credit
In the case of short-term liquidity needs, for example, in the event of unexpected expenses or bills, a so-called mini-credit or short-term credit can help. But beware: the interest rates are particularly high here! However, a short-term loan can be paid out within 24 hours. Here, one-time credit amounts of 50 to 3000 euros are made available. Due to these comparatively small sums, the banks can speed up the procedure for the credit decision: sometimes it takes only a few hours to get a decision on your application. You can find current offers for mini loans in this current comparison:

Ecological-social loans
Finally, there is also the possibility to make a contribution to a good cause with your loan. At least that is what the numerous social or eco-banks promise. Many of these mostly young credit institutions support ethical, social or ecological projects of private customers at good conditions. Eco-credits are granted, for example, for the installation of solar systems or for climate-neutral construction. Social microcredits are also offered by many of these banks.

What requirements must be met in order to receive a loan?

As a rule, it is important to have a secure monthly income. But of course it also depends on the marital status and any maintenance obligations. If one has already taken out a lot of loans, it can be difficult to get another loan even with a high monthly income. In most cases, the banks have internal checking systems here that assess a customer's creditworthiness.

In addition, special companies such as Schufa are usually commissioned to check the creditworthiness of a customer. Incorrect information in credit applications can thus be seen through relatively easily by the banks. And as a rule, they lead to the rejection of the application, close off future financing options via the bank in question, and can also permanently impair the bank's own credit rating. So you should be honest here in any case!

From the information provided by the potential borrower and the results of the internal verification system and external service providers, the bank obtains an overall picture of the customer. On the basis of this overall picture, the bank then decides whether a loan can be granted in a certain amount.

Find suitable credit and suitable credit amount

What does a positive credit decision for universal credit depend on??

The income composition
The family income is the most important requirement to get a positive credit decision for universal credit. If there are several people in a household, all the income of the adult family members can contribute to the income calculation.

An important type of income is your monthly salary from employment and that of your spouse or partner. In the case of self-employed persons, the determination of income is somewhat more difficult, since the profit of the activity is usually determined on an annual basis. Here, the balance sheet or profit and loss statement, the declaration of the tax advisor or the income tax assessment from the tax office helps to determine income.

In addition, there are any side jobs or remuneration for voluntary work that you may also have. Other types of income may include interest and dividend income from securities or the surplus from renting out a property.

The credit report of the Schufa
For each credit request of a private person, an inquiry is made to Schufa (Schutzgemeinschaft fur allgemeine Kreditsicherung). Almost all credit institutions are affiliated with Schufa, which reports credit data to the credit agency and receives it in return. In addition, companies that grant credit for goods or services are connected to the Schufa system.

Schufa stores the following data on private individuals from credit transactions:

  • Personal data such as name, date of birth, address
  • Information on bank accounts, loans and credit cards
  • Details on leasing and cell phone contracts
  • Guarantees
  • Account details with mail order companies
  • Negative characteristics on contract violations (overdue credit installments, unpaid debts)
  • Insolvency proceedings

The credit agency uses mathematical formulas to determine the credit score for each customer from the data stored at Schufa. Customers with negative rankings are usually not granted loans.

If things get tight when assessing creditworthiness, it can be helpful if the customer can provide additional collateral for universal credit.

Especially in the case of consumer loans, such as the purchase of a car, it is common to take the financed object as collateral for the loan. This is technically also called transfer of ownership by way of security.

Further securities for a credit are the assignment of credit balances on accounts, claims from an endowment life insurance or a building society contract or the pledging of a securities account.

For larger loan amounts, the registration of a land charge (or a mortgage) on a property can also represent additional loan collateral. Here, however, it is important to pay close attention to the modalities: A mortgage expires with the repayment of the loan, while a land charge remains notarially until it is actively deleted from the land register.

If your own creditworthiness is not sufficient for the loan request, you can also name a relative or a person you trust as a guarantor for a universal loan. The guarantor must then also disclose his creditworthiness and provide the credit institution with a self-disclosure.

The maximum loan rate or loan amount – which loan at what income?

To determine the maximum installment amount for a loan or the maximum loan amount, there are different ways of calculation. All calculations are based on the available income. In our guide, we have prepared three methods as examples for determining the installment amount or credit limit for you:

  • Method 1: Monthly income less deductible
    The deductible does not correspond to the actual cost of living of the household, but is an imputed average value determined from statistical surveys. The deductible includes costs for rent, living expenses and insurances. For a married couple, a deductible of 1.000 to 1.200 Euro estimated, plus 200 to 300 Euro per child per month. The difference between the monthly income minus the deductible is used as a basis for calculating the maximum loan installment.
  • Method 2: monthly net disposable income
    The monthly net income corresponds to the total income of the family from all types of income. This income is multiplied by a factor of 110 to obtain the maximum possible credit limit. With a monthly net income of 2.000 euros would result in a maximum credit limit of 220.000 euros arithmetically result. This calculation assumes that the income is regular and sustainable and that the customer has a good overall credit rating. The calculation is more intended for real estate lending. In this order of magnitude a loan is only feasible against registration of a land charge on the financing object.
  • Method 3: Annual income for assessing the creditworthiness of self-employed persons and freelancers
    Self-employed and freelancers usually have fluctuating monthly income in contrast to employees. To assess the creditworthiness of these people are based on the annual income of the past two to three years. The second criterion is that the self-employment has already existed for several years, in order to assume that the business is stable. Banks often grant seven to nine times the amount of the lowest annual income of a self-employed person as a guideline as a maximum credit line. Again, the size of the loan refers to real estate financing with the property as collateral for the loan.

Which loan suits me?

However, the type of loan always depends on the personal attitude to life of the borrower. If it is rather a thrifty and cautious type, he wants to repay the loan as quickly as possible. Then you can choose an installment loan with a high repayment rate. Here it is easy to foresee when the loan will be fully repaid. If you want to be financially flexible, you should perhaps rather opt for the framework loan. With this one can adjust the height of the respective credit sum directly to the need.

The budget calculation
In order to find out which loan is possible with which income, the budget calculation should be a central component of your planning. With a solid budget calculation, you simply determine the amount that remains for financing as a surplus of income over expenses.

Where can I find the right loan for me?
You can of course seek advice from a bank. Often it is then however in such a way that products are sold, which are lucrative primarily for the credit institute. If you do your research online, you have a better chance of finding a loan that suits you.

But be careful: the anonymity of the net attracts again and again also loan sharks and dubious traders!

It is therefore important to obtain comprehensive information. A loan calculator * can help. You can see here at first glance, which monthly installment is to be paid. This helps ensure that there is enough room for other obligations such as rent, utilities, maintenance, gasoline, insurance, etc., in addition to principal payments. remains. The comparison of the total costs including fees and interest is also facilitated by the loan calculator. This way you can quickly find the best provider. Loan calculators are offered for example by smava and CHECK24. Here you can directly start an inquiry:

The online loan application: from application to disbursement in under 48 hours

How long does the disbursement of a loan take??

When savings are tight and urgent payments need to be made, a loan can be a good decision. However, the conclusion of the loan should be well thought out and the offers of the banks should be carefully examined. A few years ago, a lot of paperwork had to be completed for a loan application and the long waiting times for a loan decision did not make it any easier.

These times belong to the past, because today loans are applied for online and very often paid out in a few hours to days. The application form is filled out online and sent to the respective lender. Many credit institutions advertise with an instant decision and a rapid disbursement. In practice, it usually takes only 48 hours from application to disbursement.

These documents are needed for a loan

Loans are not granted blindly by credit institutions. Of course, some guidelines and also criteria must be met, so that it comes to a loan approval and a subsequent loan disbursement. In order for banks to review the application, some documents must be submitted:

  • Complete account statement of the last three months
  • Proof of salary
  • Registration certificate
  • Household bill

The duration of the credit check with a bank

Credit institutions are anxious to check the credit application and the submitted documents as quickly as possible. However, there may be waiting times of varying lengths. Some banks need only a few hours for the examination, other banks again leave themselves somewhat more time.

But how long does the disbursement of a loan actually take??
If you apply for a loan online, you can expect to receive a loan decision from the bank within a week at the latest. Due to the diverse selection of credit institutions, the banks are of course aware that there is strong competition. For this reason, banks want to score points with potential borrowers with fast processing, low interest rates and courteous service.

The differences between an online loan and a loan at the house bank

You will now also ask yourself: what difference is there between an online loan and a loan in the branch? With on-line credits it concerns in most cases offerers of a direct bank. Direct banks have the advantage that they can offer much more favorable conditions for their customers due to employee savings. In addition, the loan application is easy and convenient from home and you can check the various offers with a few clicks yourself.

The disadvantage of such loans, however, is that no personal advice can be used. The situation is somewhat different for a loan in a bank branch. Here you sit opposite the advisor and all open questions are answered. The disadvantage is that the processing time in a bank branch is usually a little longer than with direct banks.

Cheap loan from a credit broker: How does Creditolo work?.de and what experiences there are?

An alternative to the online loan or the loan at the house bank offers the use of a professional loan broker. A reputable credit broker like Creditolo.de, located in Halle an der Saale, can also offer loans for special target groups such as the self-employed, people over 60 or with an income below 2.000 net per month, but also young single people, z.B. arrange for car financing or debt restructuring.

Mediated by Creditolo loans in the amount of 1.000 to 100.000 euros with a term of up to 120 months. Loans without Schufa query are also offered. Credit-free loans are limited to a maximum amount of 5.000 Euro limited. There are no upfront costs for the loan application.

Creditolo has been active as a credit broker for 16 years, offers a simple credit application and a quick credit decision. So far, more than 60.000 loans successfully brokered. The credit inquiry is in any case free of charge and non-binding, with no upfront costs.

The website also features authentic customer experiences with credit brokering, most of which are positive. It can be made without obligation via the credit inquiry form on Creditolo.en *.

Conclusion – online loan or loan in a branch office

Due to the wide range of offers and the reduced formalities, very many borrowers decide to take out a loan through an online direct bank *. The advantages are obvious. On the one hand, the loan can be applied for quickly and easily, and on the other hand, a quick disbursement is ensured. Prerequisite for this is of course a positive review of your submitted documents.

Alternatively, you can also commission a credit broker such as Creditolo * to obtain a credit offer for you from affiliated banks and other lenders, without obligation. Pay special attention to references and test certificates, which guarantee the seriousness of the credit intermediary.

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