- asic: In order to fundamentally get a loan contract, a place of residence in Germany and the age of majority are mandatory.
- Creditworthiness: Depending on the loan amount and purpose, the bank requires a certain creditworthiness. This includes, for example, a regular income, good Credit Bureau information and other characteristics.
- Bank’s discretion: In principle, it can be said that the requirements for each bank can also be different. Ultimately, the loan approval is also a discretionary decision by the bank.
What are the requirements to get a loan!
Obtaining a loan is not particularly difficult today if the requirements are met. But what are the requirements for borrowing? Below is an overview. Lending is subject to certain conditions to ensure security for the bank. With a loan, long-cherished wishes can be fulfilled – buying a car, buying furniture, a nice trip, for example. However, banks are becoming more and more careful when lending to avoid possible default.
They therefore set out lending requirements that can vary depending on the occupational group, age and income situation.
When are you eligible for credit?
Credit capacity is the ability to conclude a credit agreement in a legally effective manner. This is a crucial requirement for any loan. In Germany, private consumers can agree on a loan agreement as soon as they are fully legally competent. This is the case when the adult reaches 18 years of age.
Adult creditworthiness is only at risk if there are serious mental or psychological restrictions. Minors, on the other hand, are generally not able to credit themselves. Many credit institutions also link lending to permanent residence in Germany.
In addition, there are age restrictions “upwards”. From certain age limits – for example 70 or 75 years – often no more loans are granted. There are no legal reasons for this, but for business policy. The risk of death and illness is greater in older people, so the likelihood of credit disruption increases.
How is the credit rating checked?
In addition to creditworthiness, creditworthiness or creditworthiness is another important credit requirement. Creditworthiness is when you are economically able and willing to meet the payment obligations associated with the loan on time and in full. Banks use various instruments to check their creditworthiness.
A must is the Credit Bureau information, which is always obtained ( More information at: Credit without Credit Bureau). Negative characteristics in Credit Bureau queries – for example, dunning procedures, account attachments, affidavits or even personal bankruptcy – lead to the loan being rejected.
The creditworthiness is often calculated using scoring methods. This applies in particular to consumer loans. Scoring is a mathematical-statistical procedure that determines the probability of default of a loan on the basis of “accurate” data of the respective prospective customer. If the scoring does not reach a sufficient score, no lending will take place.
Another “classic” assessment tool is the assessment of the ability to serve capital. It is common for larger loans and is often used to supplement scoring.
What does capital serviceability mean as a requirement?
The interest and principal payments on the loan are referred to as the lending service. A borrower must be able to provide repayments, which means that he must be able to afford the agreed interest and principal payments. This is usually checked with the help of a household bill.
The regular income (wages, salaries, investment income, rental income) of the borrower’s household is compared with the usual expenses for living, housing and mobility as well as other obligations.
There must be enough left to show the rates. Otherwise there is no adequate serviceability. In the case of many loans, the rate burden can be influenced in the context of the choice of term in such a way that the prerequisite of serviceability is met.
Why is a safe income important?
A secure regular income significantly improves credit opportunities. This is the reason why employees in solid employment relationships are more likely to get credit than the self-employed. Employment income can be calculated well and reliably. It forms the basis for servicing credit installments. The self-employed also generate income. However, these fluctuate and depend on the respective business situation.
From a bank’s perspective, this increases the credit risk. This also applies to jobs that are not yet sufficiently secure – for example, during probationary periods or training relationships. In all of these cases, banks are often reluctant to lend or make additional demands.
What role do collateral play?
Whether collateral is required for loans depends on the type of loan, but also on personal creditworthiness. Typical installment loans in consumer credit business are usually granted without collateral. Here proof of income is sufficient as “security”. It takes place via corresponding wage and salary statements or bank statements.
In the case of car financing, the vehicle is usually required to be assigned as security. The standard is protection for real estate financing – because of the high loan amounts and long terms. The mortgage serves as a security instrument, less often the mortgage.
Borrowers who have “deficits” in their creditworthiness can often still get their credit by providing collateral. A distinction is made between real and personal security. Real collateral is about pledging or transferring assets as security or assigning claims.
The most important personnel security is the guarantee ( More information at: Loan with guarantors). Alternatively, in the event of a lack of creditworthiness, the co-application can also be requested by a second borrower with good creditworthiness.