Apply for a loan: This is what you should know

Apply for a loan: What is meant by a loan?

Applying for a loan means borrowing an amount of money from your bank or another credit institution. The loan amount is used to make an investment. This applies in the private sector as well as for an entrepreneur who has to prepare a balance sheet. The payment and repayment of the loan amount are set out in a loan agreement.

A credit agreement is different from the loan agreement. If a loan is applied for, the validity of the loan agreement applies from the moment it is signed. This means that a borrower is directly obliged to repay the loan on time. A loan agreement is only valid once the money has been paid out to the borrower.

What are the reasons for taking out a loan?

If you want to make a specific purchase, you can apply for a loan. There are a variety of reasons and examples for taking out a loan.

In the private sector, for example, loans are applied for

• to finance a car
• to be able to move
• to finance your own studies
• Buying furniture, for example to remodel a kitchen
• to finance a vacation.

Borrowing can also be used to refinance an installment loan or to offset an overdraft.

Entrepreneurs decide to apply for a loan in order to

• to start a company
• to cover ongoing operating costs and short-term liquidity needs
• to make an important investment.

The reasons are complex, like the people who apply for a loan.

Apply for a loan: What requirements must be met?

To apply for a loan, the following basic requirements should be met:

• The borrower must be at least 18 years old. Once you come of age you have unrestricted creditworthiness.
• The main residence must be in Germany.
• The borrower must have German bank details.

In order to apply for a loan, a borrower must also be able to prove good creditworthiness. This can be proven with a positive Schufa score. Schufa information is used by banks and other credit institutions to determine creditworthiness. Your own solvency can be additionally proven with meaningful proof of income.

It is also an advantage if the borrower can offer the lender security. The lender only has this access if the borrower can no longer fulfill his obligations under the loan agreement.

Before granting a loan, a lender requires the borrower to provide a declaration. This confirms that the money will be used for your own purposes and that the loan amount will be repaid at the agreed times. With this step, the lender minimizes its own risk of default.

How does a loan request work?

To successfully apply for a loan, a borrower goes through the following four steps:

• Determination of the loan volume
• Proof of the borrower’s identity
• Apply for a loan: provide the necessary evidence
• Transfer of the desired loan amount

Below are the four steps to apply for a loan:

Step 1: Determine the loan volume

Regardless of whether the money is to be made available for the private sector or for your own company, the loan volume is first determined. It makes sense to take into account the amount of interest and the term of the loan agreement. It is therefore worth comparing several loan providers.

Step 2: Proof of the borrower’s identity

When applying for a loan, the applicant for a loan proves their identity to the lender. This works, for example, in the branch of a credit provider or on their website on the Internet.

Step 3: Apply for a loan: Provide the necessary evidence

In order to grant a loan amount, further evidence must usually be provided. The creditworthiness can e.g. This can be proven, for example, by regular proof of income or the pension certificate.

Step 4: Transfer the desired loan amount

If there are no negative aspects of applying for a loan, the money will be paid out. To do this, it is necessary for the borrower to provide the lender with an account number.

As soon as the lender has checked all the requirements for taking out a loan, it allows the borrower a credit agreement. Once signed, this contract becomes legally valid. This means that the desired amount of money is transferred directly to the borrower’s account.

Apply for a loan: What should you consider before signing the loan agreement?

The aim of applying for a loan is to conclude a loan agreement. Before signing, please note the following details:

• Before taking out the loan, the borrower analyzes his own financial situation.
• Various credit providers are checked for their trustworthiness. It also makes sense to keep an eye on the lender’s conditions.
• The loan is secured so that the loan can be repaid on time later. It is important to explore any security that can be offered to the lender.
• The borrower then makes his decision. This is for or against taking out a loan.

What are the advantages of applying for an online loan?

Apply for a loan also works online. This has the following advantages for the borrower:

• The conditions of individual providers can be easily compared with each other.
• The borrower gets a better overview of the types and variants of loans (e.g. installment loans, car loans, working capital loans).
• The application is submitted regardless of the opening hours of a bank or other credit institution.
• Necessary documents can be easily uploaded to the website of the online loan provider. Time-consuming shipping via post is no longer necessary.
• The identity is established using the VideoIdent process.
• After the loan has been applied for and the formalities of the loan request have been completed, the loan is paid directly to the applicant.

The online process has many advantages.

What are the disadvantages of taking out a loan?

Taking out a loan involves the following disadvantages for the borrower:

• Taking out a loan leads to an entry in Schufa. This has a negative impact on your creditworthiness if the installments are not repaid on time.
• When you take out a loan, the risk of over-indebtedness increases.
• Anyone who applies for a loan must expect higher overall costs due to the interest burden and the lender’s fees.
• A long repayment agreement means that the financial budget can be strained for years.
• The loan agreement binds you to the terms and conditions. If this is to be redeemed beforehand, an early repayment penalty may have to be paid.
• The purchased item loses value with each passing day. In any case, any sales price is not identical to the loan amount taken out.

Always be aware of the disadvantages of taking out a loan online.

Apply for a loan: In which cases is the loan application rejected?

Anyone who applies for a loan must expect that this application will be rejected. This usually occurs when the borrower does not meet the required requirements. For this you can e.g. B. the following reasons speak:

• The borrower is unemployed or is in the probationary period of an employment relationship.
• When applying for the loan, you must specify a freelance position that has not existed for three years.
• When applying for a loan, the requirement of good credit is not met because, for example: B. the relevant proof of income cannot be presented or Insolvency proceedings have been opened against the applicant.

Apply for a loan: Carefully compare lenders

Before you decide to apply for a loan, it is important to do a thorough comparison of different lenders. This comparison will help you find the best deal for your financial situation.

Lender selection criteria

To choose the right lender, you should consider various factors. Here are the most important criteria for comparison:

• Interest Rates: Compare interest rates offered by different lenders. Lower interest rates can significantly reduce the overall cost of your loan.
• Fees and additional costs: Be aware of possible fees and hidden costs that could influence the loan offer.
• Terms: Different terms offer different repayment options. Choose the term that best suits your financial planning.
• Flexibility: Some lenders offer flexible repayment options. This can be helpful if your financial situation changes.

By carefully considering these aspects, you can find an offer that meets your needs.

Importance of customer reviews

Another important factor when applying for a loan are customer reviews. These can help you better assess a lender’s reliability and customer service:

• Customer satisfaction: Reviews provide information about how satisfied other customers were with the service.
• Dealing with customers: You will learn how the lender deals with its customers in various situations.
• Service Quality: Customer reviews often reflect the quality of customer service.

Consider these reviews. This means you can choose a lender that not only offers financially attractive conditions, but also has good customer service.

Consider long-term commitments

When you apply for a loan, you are making a financial commitment. Therefore, it is important to choose a trustworthy lender. Make sure the lender has both favorable terms and a good reputation. A good reputation means reliability and good customer service.

By taking the time to compare, you will make an informed decision. This decision should be in line with your financial goals.

Apply for a loan: Make a responsible decision

If you’re thinking about applying for a loan, it’s important to think carefully. Ask yourself:

• Do I really need a loan?
• Can I really bear the additional burden?
• Can I postpone the investment (into the future)?

Don’t take this decision lightly. It is important to carefully analyze your current financial situation.

Using credit responsibly is very important. This means that you should be aware of the commitments you are making. Make sure you can meet these obligations. And remember that you pay it back on time.

Before you decide to apply for a loan, look at other options. Are there perhaps other ways to meet your financial needs that involve less risk? If you choose one, do so consciously. Consider all the consequences that this decision entails.