Important for personal loans
- Several sources of credit
Personal loans are available from banks as well as through platforms where private investors participate in the loan – with so-called peer-to-peer loans.
- Bank loans often cheaper
With good creditworthiness and sufficient income, bank loans are often cheaper than so-called peer-to-peer loans. Above all, the interest rates differ.
- Reconsider earmarking
A dedicated loan for modernization, the car or the property is often lower interest rate than a traditional personal loans. Therefore, use the appropriate type of credit, such as a car loan.
- Often only given to employees or civil servants
Self-employed individuals or those with moderate credit ratings have the opportunity to obtain credit through peer-to-peer lending platforms. The maturities are often lower, the interest rates higher.
The term personal loan is not always clear which form of loan is meant: in addition to banks increasingly offering it to groups of private individuals. In both cases, however, you can get favorable terms with a few tips – we will explain how you should proceed with the selection.
Forms of personal credit: From the bank / from private
To help you assess which type of personal loan would be better for you, you should compare both forms. Therefore, we first explain the respective characteristics and differences.
Classic: the bank as a financier
Basically, a personal loan is used when the loan is used exclusively for private purposes and private individuals. Typical variants would be for example the consumer loan or the personal loan. These loans were and are usually installment loans that are serviced monthly with principal and interest. As a customer, you have a number of rights and obligations, such as when and how the loan can be terminated, for example.
If the personal loan is extended by a bank, then there is also talk of a consumer loan contract. Here, all agreements must be made in writing. Conversely, the bank may not advertise with “phantasy interest” if it makes the interest rate dependent on your creditworthiness (credit rating). It must give the interest rate as a representative example that at least ⅔ of all customers really get.
Freelancers and traders often excluded
Many banks only grant loans to employees without a time limit or civil servants. Freelancers or traders are then exempted from such personal loans. Irrespective of the fact that you only want to use the money for private purposes.
Newfangled: Private lenders as financiers
For some years, however, there is also the variant that lenders via online platforms merge and finance projects. This often gives you the advantage of getting a better interest rate. And even if the credit rating is actually too low. Or longer terms are accepted that a bank would have declined.
They advertise your credit project namely and give open information for what purpose the money is needed. Whether it’s a rescheduling, the purchase of a new car or purchases for the garden pending – as long as you can present yourself well and the financial conditions are right, this is a good alternative to bank credit.
Frequently incurred before the actual loan completion certain costs, for “credit certificates” or other additional services. In this case, requests are made to credit bureaus that calculate a score. Of course, such costs must then be deducted from the total loan amount, which increases the effective interest rate.
Find the right personal loan for you
Which of the two forms of credit is ultimately cheaper for you depends on your personal preconditions. Therefore, choose which of the following features will make your life easier – this will make it easier to find cheap loans that you can choose from.
Bank loans are often cheaper
Which option you choose depends of course on your own financial circumstances. If you earn well, have little or no debt, and pay reliable bills, the good credit rating on a bank loan is likely to result in low interest rates.
In the past, however, there were credit interruptions, negative entries were entered into the Private credit or, if you were a self-employed person, you have a large amount of fluctuating income, the path is more likely to lead to private lenders. Negative entries include, for example, enforcement orders, canceled loans and similar features. They are only deleted after three full calendar years, provided the debt has been fully paid. Banks check here exactly and often reject in advance. A personal loan from private lenders can then be the only alternative, although higher interest rates are common.
Peer-to-peer loans even with bad credit
Unlike traditional bank loans, where extensive credit checks are carried out, private lenders also have other factors. These contribute a certain amount to your loan project and set an interest rate. A personal loan from private individuals can be partially financed, with good presentation and good certificates, within a very short time.
These things you should keep in mind with a peer-to-peer loan:
- Avoid additional fees
Some providers may incur additional charges for pure credit inquiry or solvency information. These should be avoided as far as possible, because ultimately they increase the cost of borrowing and thus mathematically the interest payable.
- Combine credit types
It can be helpful to reduce the loan amount if necessary and thereby increase the chances of financing. So then a combination of peer-to-peer credit and classic bank loan would be possible.
- Honestly and in detail describe
Stay with the description of the intended use with the truth, gladly are detailed lists of the individual costs. This gives the lenders a better overview and an impression of how the loan amount actually comes about.
If the loan project was 100 percent funded, a bank will intervene for legal reasons. It summarizes the payments of the lenders, pays the loan to you, manages it and serves the lenders. For this she takes a commission, which makes the credit more expensive.
But by no means all projects find enough lenders, the success rates are between 20 and 70 percent, depending on the platform and purpose. Here are other alternatives, especially for cost reasons, the kinship loan is often preferred. Basically, you can complete this informally with relatives, but it is advisable to set up a written contract here. This gives you and the lender the security of avoiding disputes over possible interest or repayment. Without problems, it would be possible to introduce customary collateral or even make an entry in the land register for larger sums.
Written form for relative loan for investments
If you need the money to finance an investment, such as a property, you should definitely follow the written form. Otherwise, the interest you pay would not be tax deductible. The tax office demands documents, it also checks the interest rate and in part only accepts market conditions.
Cheaper personal loan thanks to collateral
Whether and when a loan is cheap for you, of course, depends on the individual case. You can still have a positive effect on the interest rate for both variants of the personal loan. If banks rate their income as too low or it fluctuates widely, the risk is higher. Because in case of doubt, they have to get the money back on any way yes, the standardized wage and salary assignment in the contract is not always enough.
Especially with larger sums, it is advisable to either bring in a guarantor or assign securities to the bank. The bank does not necessarily accept all collateral. The usual types are occupational disability insurance, endowment life insurance or term life insurance. If you are self-employed, you also have to reckon with the private loan that the bank requires an assignment of claims.
Collateral instead of residual debt insurance
Compared to a residual debt insurance that brings the advantage for you that no additional costs. Because this only increases the effective interest rates, quite apart from the fact that tight conditions must be met. In case of doubt, it can amount to the fact that the residual debt insurance does not pay despite sickness or unemployment.
Step by step to the personal loan
So that you not only find the right loan, but also get it as uncomplicated as possible, we will explain the process step by step.
- Calculate credit volume
Determine the required credit volume. Check whether it makes any sense and saves costs if you take both a bank loan and a peer-to-peer loan – because you can lower the interest rate by reducing the credit balance.
- Set up the household bill
After you have first calculated the credit volume, you must make a budget statement in the further course. It lists exactly how much you spend for what purpose and whether you can afford the requested loan at all. Take account statements from the last six months. Also pay attention to one-off or irregular payments, such as for insurance.
- Compare loans
Now make a credit comparison. In some cases it is helpful to specify a second borrower for better terms. Prerequisite: The specified person should live in the same household.
The personal loan calculator from FinanceScout24 shows you how much the monthly installment for different maturities and loan amounts is. The following list compares fares from several banks. Clicking on the tariff details shows you if, for example, special repayments are possible or how the credit decision is made.
- Send loan application
If an offer is interesting, you will receive it via e-mail and by post. To identify himself to the bank, the whole thing is a postident coupon. You must present this to the employee of a branch of Deutsche Post with your identity card or passport (with registration certificate). Subsequently, the loan application is sent, the bank will start a Private credit query.
- paying out
If everything goes smoothly over the stage, the bank declares the acceptance and the loan amount is paid out within a few days. Some banks even use flash payments to speed up the payout process.
Loan opportunities for self-employed and freelancers
More and more banks are also lending personal loans to the self-employed and freelancers. The interest rates are different, but often the minimum income is higher. Otherwise a permanent job is required.
questions and answers
When is a personal loan useful?
The personal loan is useful especially for manageable purchases and smaller loan amounts because the application runs relatively smoothly. Normally, no collateral or guarantors have to be provided, and special repayments are much more common. If, on the other hand, you want to finance a vehicle, then there are often better interest rates due to the collateral.
How does the bank determine that this is a personal loan?
Personal loan means in this context that you as a private person take out a loan for private purposes. This loan is usually not secured, the contract is only a salary transfer in favor of the bank provided. Unlike car loans, where often the registration certificate Part II as security must be deposited. Top in real estate financing, where the house is mortgaged and the loan is registered as a mortgage in the land register.
The employment relationship may not be limited, at least the time limit should be longer than the requested repayment term. Another problem is a probationary period. Nevertheless, this does not have to lead to rejection. Some banks then require the parallel conclusion of a residual debt insurance. However, here you should check if there are any non-recoverable and collateralable securities that you can specify instead. This would avoid these additional costs.
What are the advantages over other types of credit?
Initially, uniform form loan agreements will be used. This means that you as a borrower have a complete overview of your rights and obligations before concluding the loan. Here it is regulated when and how special repayments are possible. Increasingly, banks are also granting payment pauses when things get tight. Compared to the credit line has the advantage that clear arrangements for repayment are made. The bank can not just beat the credit line and of course you are safe from interest rate adjustments.
Are personal loans earmarked?
The classic personal loans in the form of installment loans are not earmarked. So you do not have to prove to the bank what the money was used for. However, this is also accompanied by a maximum limit, which is often 75,000 EUR. This is simply due to the lack of collateral and the lack of earmarking.
Earmarking means nothing negative, especially with larger purchases, this brings with it an interest advantage. Because the car or the real estate is part of the collateral, they are virtually mortgaged. In case of doubt, the bank would thus have opportunities to use the loan, if there are no installments or other problems. Even with modernizations, the loans are often earmarked. Often, proof of real estate ownership alone is sufficient; entries in the land register are the exception. A proof, however, for which the money is used, does not have to be furnished. Owners therefore benefit from low-interest installment loans.
How do I recognize a good platform for peer-to-peer loans?
Above all, it is important that the provider cooperates with a reputable and reliable universal bank. Because it will hand out the loan and manage it after private investors have financed your loan.
Look for mentions in the press and use independent review portals. The experiences of users are not least helpful in order to better understand the processes. But do not blindly trust such reviews or even test seals. There are large and independent portals that are intermediary or even bodies such as the Stiftung Warentest, which is regularly active in this area.
Even a supposed “success rate” you should not blindly trust, because that does not necessarily mean that your project is successfully financed. Take a look at the current projects and compare how they are presented there and which key data (loan amount, scores, etc.) are posted there.