Age of the borrower
In principle, banks do not lend to minors. Therefore, the age of majority is an important prerequisite for an applicant receives an unsecured loan https://citrusnorth.com/unsecured-loans/.
Each time an application is submitted, the bank checks whether the applicants are at least 18 years old. If the loan application is made directly in a branch, the applicants must submit their identity card. In the case of online credit application, the age verification is carried out at the latest when the video or PostIdent procedure is carried out.
Accounts for minors
For investments such as time deposit or call money and for savings accounts, the holders of the respective accounts must not be of legal age. For example, many banks offer their clients the ability to create accounts for their children or relatives.
Consumer credit in Germany is only granted to borrowers with a fixed place of residence in Germany. Therefore, applicants must prove this with the help of the identity card and possibly a confirmation of registration.
In addition, a German bank account is usually required for the lending, because the bank needs an account to which they transfer the desired loan amount and from which they can deduct the monthly installments due.
The creditworthiness of borrowers in Germany is determined in various ways. A first clue is the so-called “SCHUFA score”. This value from 0 to 100 gives banks information about the creditworthiness of applicants. 100 means an optimal credit rating, where the default risk is close to zero.
The SCHUFA information also provides the Bank with information about current loans and payments that have not been made. They are entered in the SCHUFA file of the consumers.
Other options for checking creditworthiness
In addition to the SCHUFA, there are other companies that classify the creditworthiness of consumers such as Boniversum or Creditreform. Which credit agency the bank uses remains up to her. It is important that the bank obtains the permission of the applicant to obtain information about its creditworthiness.
Ultimately, banks usually form their own score, with which they classify the creditworthiness of a customer. If, for example, a loan is requested from the house bank, the bank checks the payment behavior of the customer based on his account transactions. When lending in the store also counts the personal appearance of the applicant.
As a rule, the higher the credit, the more accurate the creditworthiness and the collateral security of the applicants are checked.
How you influence the credit rating yourself
As a rule, consumers can influence their own creditworthiness very well. For example, it is advisable to repay loans without delay. In addition, negative factors, such as many different credit cards or many different loans, are not conducive to good credit.
In addition, criminal proceedings or frequent credit inquiries can be negative.
No data storage for inquiries
Take the opportunity of credit comparisons like on FinanceScout24. Here only credit conditions requests are made.
These are not noted in the SCHUFA file and are not available to other banks.
One of the most important requirements for lending is a regular income. Only those who can prove that they have sufficient income receive a loan from a bank.
The type of income may vary, however.
- Employees: The most advantageous for a loan is income from a job. In this case, the bank checks salary statements of the employer.
- Self-employed: Self-employed people are more likely to have difficulty obtaining loans because they need to prove in more detail that they have sufficient income. As a rule, banks require income tax receipts from previous years. In addition, usually, a business evaluation is required, which reflects the current business performance. However, some banks generally do not lend to the self-employed. Banks that provide self-employed with loans, in return usually require significantly higher interest rates.
- Retirees: A regular pension or pension is usually accepted by banks as a regular income.
- Further income: Anyone who has regular income from renting and leasing can also indicate this in the loan application and thereby increase the chance of a successful license.
Not only does the bank benefit from a regular income. Who knows what the monthly income and expenses are, who can plan his loan more precisely.
For example, after a simple household bill, you quickly know what maximum installment you can choose.
For larger loans such as mortgage lending, income is usually no longer sufficient as collateral. For this purpose, banks require additional collateral:
- Life insurance: A life insurance with some real estate loans is a prerequisite for the award. It settles the remaining debt if the borrower should die before the end of the term.
- Occupational disability insurance: Similar to life insurance, a BU can also be used as collateral. The insurance applies if the borrower is no longer able to earn a living by working for health reasons or after an accident.
- Second borrower: A second borrower can usually be used as collateral. In this case, however, he must also have sufficient credit and income to increase the likelihood of lending.
- Guarantor: A guarantor is liable for his assets and his income for the debtor, ie the borrower. Banks sometimes accept guarantors for credit protection. However, guarantors should consider very carefully whether they want to take on this task. Because they are used in the event of a personal bankruptcy or permanent insolvency of the borrower to pay off the debt. If the guarantor is a direct guarantor, the guarantor is liable in the same way as the debtor. If the latter can no longer pay, the bank turns directly to the guarantor and can, for example, also have his income seized.
- Assignment: In this case, the object to be financed remains the property of the bank until the loan has been fully repaid. For example, the chattel transfer is often used for car and motorcycle financing.
- Mortgage: For the financing of a property, the bank usually enters a mortgage in the land register. The bank has the opportunity to auction the property in case of default, to pay off the proceeds of the debt.
Take mortgage for further loans
A mortgage can also serve as collateral independent of the financed property. It remains valid for the term of the loan and beyond in the land register.
Equity can greatly benefit lending. This is especially true for large loans such as real estate loans. Here, most banks demand an equity ratio of at least 20 percent anyway, so that the loan is approved.
In addition, equity capital not only has a positive effect on the receipt of a loan but also ensures that the repayment amount and the total credit amount are reduced. For smaller consumer loans, no equity is needed.
High consumer credit as equity
For many real estate loans, equity is “simulated” by higher consumer credit. In addition to the real estate loan, borrowers will take out a lower loan of 10,000 or 20,000 euros, which will eventually reach the equity ratio.
The role of age in real estate loans
With the introduction of the EU Real Estate Credit Directive in 2014 and its entry into force in March 2016, age has become an important factor in real estate lending. Banks are encouraged by the Directive to scrutinize whether consumers will be able to repay a loan. With very long maturities of several decades no longer guaranteeing that older borrowers will experience the end of their term, many banks are refusing to lend. This is also the case if the borrowers otherwise have a very good credit rating.
The process of lending.
- Comparing loans: As a consumer, you should compare different offers before each loan application. The higher the total loan amount, the more important, for example, the interest rate. Check here especially the annual percentage rate. He already contains possible fees. Look at real estate loans or larger loans to see if the bank offers free special repayments. This gives you the opportunity to repay your debt faster and save interest.
- Apply for a loan: If you have found a suitable offer, apply for your loan. For consumer credit, you usually have the option to apply online. Alternatively, find a branch of the bank from which you want to get a loan. For the loan, you need salary statements, bank statements, your identity card and a valid bank account. As a rule, the bank will request these documents after submitting the loan application.
- Legitimization: Once you have received the complete documents for the pre-approved loan, you have to legitimize yourself with online credits. Some banks offer the VideoIdent procedure for this, which means that you identify yourself at home via a webcam. However, most banks use the PostIdent procedure. You will then receive a PostIdent coupon that will allow you to visit a post office in your area. There you legitimize yourself with your identity card. The signed loan application will then be sent to the bank together with the PostIdent coupon.
- Authorization: After reviewing all relevant documents, the bank will decide on the final approval of your loan. If lending has been approved, you will usually receive your money within a few business days. Some branch banks check the documents on the spot and can pay off the loan on the same day.
Alternative: Personal loans
If you are under the age of majority or do not meet other requirements for bank lending, you can also use personal loans. Of course, there is no precise regulation here.
The loans are then given by parents, other relatives or friends. As a rule, these “lenders” do not charge interest. Borrowers are given a higher moral obligation when it comes to debt repayment.
Special case: Lending for founders
Banks such as KfW provide special loans for business start-ups. They usually can not provide any special collateral.
Therefore, lending, in this case, is based on a detailed business plan. The same applies if the loan is provided by alternative agencies such as “Business Angels”.
Receive credit through crowdfunding
Another alternative to the bank is crowdfunding. In this method, borrowers present their projects on an internet platform.
As a rule, lenders are private individuals who receive something in return for their provided capital, for example, the first prototype of the company or company shares.