5 ultimate advices to get a loan in Germany!
Before we start out with Where to apply cleverly for a loan in order to have the biggest chances for success, we take a look at the How:
1. Find the right amount of the monthly instalment
- Right amount of loan instalment
- Second borrower better?
- State income correctly
- Loan in spite of negative Schufa
- Low loan interest
At Point 5, you will use loan calculation tools that show you a preview of the monthly loan instalment.
Before you apply for a loan, you do not only need to know how much money you want to get, but also what maximum monthly loan instalment you can bear.
Let’s assume that you can afford a monthly instalment of Euros 400. However, please do not agree on a loan with a higher instalment than Euros 200!
Why is this important?
Admittedly: sometimes, people are astonished when reading this advice, or become even angry, because they think they should live below their possibilities!
This advice represents a very important security line and is therefore also on the first position.
This is your security line!
Think about it: if you calculate your loan instalment too just, you will lose your financial flexibility, if something comes up.
And the probability that a financial challenge arises, such as a bigger reparation in the appartment or of the car, during a loan term of several years is very high, as you might admit too. 😉
If you do not have freely available money, you are quickly facing the decision, whether to solve the urgend financial problem or to pay the instalment timely. Often, the circumstances take the decision for you: your current account is empty and the debit of the instalment is cancelled by the bank.
Now you have serious problems: you will be prompted to transfer the loan instalment immediately or latest the following month plus the incurring costs. How easy is this for you, when you do not have any money left?
This is often the beginning of bigger problems: at the Schufa – this is virtually the central German register for loans – you will be stored as an unreliable borrower. With this, your creditworthiness score decreases and in the future, you will only get loans with higher interest rates or almost not at all.
If you already have a “negative Schufa“ and want to get a loan anyway, please take a look at our Advice #4.
How to do it right:
Let’s stick to the Euros 400 for the monthly repayment of the loan. You agree on a loan with a monthly instalment of Euros 200 and start to transfer Euros 200 monthly to a savings account.
Most often, the loan bank debits automatically from your current account. Please set up a standing order for the savings account.
Why is that a good solution?
You remain flexible and if problems come up, you will have enough financial margin in most cases to handle them easily. You can, for example:
- pause the savings transactions for the savings account anytime– this does not affect you loan agreement at all,
- pay bigger reparations with the savings account, without having to take a new loan,
- pay the monthly instalment for the loan with the savings account, if you should temporarily not have income (unemployment, boss does not pay salary).
… and if everything should be according to your plans, you can cancel the savings account and repay the loan completely after half of the loan term (unscheduled repayment). If this is your only loan, you would be subsequently debt free.
Applied correctly, a loan can be very soothing!
There are people, who got quite used to the savings rate and were pleased to have saved money, so they now want to start to build a true fortune. Tips on this subject are in further articles on this special portal.
Go directly to the ultimate advices #2 to 5
- 2. More success through second borrower!
- 3. State income completely!
- 4. How to get a loan with “negative Schufa”!
- 5. How to get lower loan interest than anybody else!
A little request to you 🙂
Please write me about which advice helped you the most and which you could recommend to others.
This feedback contributes to improve the situation for all loan searchers. Many thanks!
Is it true that if you take a loan for buying an appartment in an detached house (Grundschuld), then the loan will never be deleted from the land register, but it remains in the case of other debts. I would be grateful for an answer.
Yes, this is true in practice and can even be of advantage. However, the entry can also be cancelled. If you are interested in this subject, please read the following explanation:
The Grundschuld does not show the current amount of the loan, but secures – most frequently for the financing bank – the land charge. Therefore, the real estate becomes a security for the loan.
If the loan is not repaid according to the contract terms, then the bank can initiate enforcement actions (e.g. the auction of the real estate) and obtains the money through the sale.
If one wants to sell the house, the Grundschuld is normally cancelled from the land register (if the loan is already repaid or is repaid through the sale). One speaks of a “lastenfreie Übergabe” (unemcumbered transfer). A Grundschuld can remain in the land register, is the financing bank of the buyer is the same bank as already registered. However, this is only seldom the case.
The registering and cancelling of the mortgage debt takes place through a notary in Germany. The notary forwards the change to the district court. There are fees at the notary as well as at the district court.
This expense can be saved most often, because if a loan has already been repaid, the bank has no reason to use the mortgage debt entry.
If one wants to get another loan at the same bank, it is meaningful to leave this entry in the register. Example:
You have bought real estate in the amount of Euros 250,000 and have taken a loan in the amount of Euros 200,000. The Euros 200,000 will be registered as a Grundschuld. Years go by and the loan is repaid little by little timely. The loan debt is now only Euros 100,000. You have a great business idea and want to establish a company. To start up the business, you need an initial investment of Euros 70,000. You can now go to the bank and ask for this loan. Being granted the loan will be easier, because you can now secure it through your real estate asset. Euros 100,000 Grundschuld would be “free”.
If you have repaid the house or appartment completely, you can, of course, arrange the cancellation of the Grundschuld through a notary. For this, you need the written clearance of the bank. So a confirmation of the bank that the loan has been repaid. Some people feel better, if no Grundschuld is on the house anymore. Does this information help you?