Small loan – take advantage of our low-cost offers!

In Germany, many people take out a loan, especially when they want to finance a house or a car. However, it is often overlooked that small loans up to an amount of 5,000 euros still make up the lion’s share of financings. A small loan is particularly interesting when you need to overcome smaller financial hurdles in everyday life. These can be important replacement purchases and repairs, as well as financing certain wishes. But what exactly is a small loan? How does it work and what should be considered when submitting the loan application? Below we show you what you need to know about a small loan and how we can help you find an affordable financing option through a comprehensive comparison of providers.

Small loan – what is it?

A small loan is a conventional installment loan that is repaid in equal instalments. While the instalment amount remains the same over the entire term, the proportions of interest (interest rate) and principal repayment change with each instalment. This is due to the fact that interest is always calculated only on the debt actually outstanding. The only special feature of a small loan is that it is mainly available for relatively small loan amounts. These range between 1,000 and 5,000 euros. In addition, there are providers of mini loans that already grant financings for loan amounts of a few hundred euros.

What are the advantages of a small loan?

A loan for a small amount has several advantages and particularities due to its structure that can make it attractive for many borrowers:

• Low loan amounts: Normally a loan amount of up to 5,000 euros is considered a small loan. Some providers even set the limit at 3,000 euros.
• Good lending chances: Although the same requirements apply to small loans as to larger instalment loans, the chances of being granted a loan are higher. For a small loan, a lower disposable income is often sufficient at least in terms of the income situation.
• Low repayments: Since a small loan usually involves only a small loan amount to be repaid, the instalments are also at a lower level. This applies even if a rather short term is chosen.
• Low interest rates: Borrowers can sometimes also benefit from lower interest rates. Due to the low loan amount, the risk of default is usually lower – after all, 1,000 to 2,000 euros can often still be paid off somehow. Banks reward this lower damage potential with lower interest rates.

When is a small loan useful?

A small loan is a sensible addition whenever you cannot or do not want to make certain everyday expenses or purchases immediately from your income or financial reserves. There can be many different reasons for this:

• You need money quickly and your assets are tied up
• You currently do not have the desired sum available
• You do not want to touch your financial reserves for a particular expense
• The interest on your overdraft facility is significantly higher than for a small loan

A debt consolidation of existing small liabilities or replacing an overdraft facility can also be a sensible use of a small loan. You should always ask yourself the following questions beforehand:

1. How urgent or important is the respective expense?
2. Can and do I want to provide the money from my own funds?

As a rule, the purpose of use for small loans is not predetermined – you can therefore use the loan freely according to your wishes.

What are common reasons to apply for a small loan?

Boost your holiday fund – the vacation loan

Whether you finance the entire trip or just want to top up your holiday fund – a small loan is perfect as an additional source of financing for somewhat more expensive trips. Even a small loan amount helps you budget. The following components of a trip are particularly relevant:

• Accommodation (hotel, guesthouse, holiday apartment)
• Arrival and departure (plane, train, car, ship)
• Meals
• Expenses for activities at the destination (holiday fund)
• Costs for travel insurances (travel health insurance, cancellation insurance)
• Costs of money availability (especially relevant outside the eurozone)

With a small loan as vacation financing you remain financially flexible and can fulfil special wishes that might otherwise not fit into the budget.

Financing a driving licence – with enough capital for your licence

Getting your driving licence is a very good reason to take out a small loan. Most people obtain their licence at a young age and usually do not have the necessary capital at that time. If relatives (parents or grandparents) are unable to help financially, a small loan can be a viable option. However, you should consider a few aspects before applying:

1. Calculate the loan amount generously: The costs for a driving licence are often not exactly predictable. After all, you may need one or two additional driving lessons or have to retake a test. For this reason it makes sense to plan an extra 150–300 euros from the outset – this gives you a reserve. If you do not need it, you can repay the excess with a special repayment option in the loan contract and thus reduce the loan costs.
2. Options if lending is difficult: As accompanied driving at 17 is increasingly chosen, lending can often be difficult. Loans may only be granted to adults in this country. In such cases the parents should take out the loan. They can also act as a second borrower if the creditworthiness of a young but adult borrower (e.g. student or trainee) is not sufficient to obtain a small loan.

If you plan for these two points from the start, nothing stands in the way of the payment of the loan and financing the driving licence. We help you find a suitable small loan and obtain the best possible terms for you.

Finance a motorcycle – get on the road with a small loan

Do you dream of adventurous motorcycle tours on the well-known roads of this world? A small loan could help you finance your desired motorcycle. Since motorcycles generally do not have very high purchase costs, small loans are often sufficient in terms of loan amount. Nevertheless, there are reasons to consider a vehicle loan (in this case a motorcycle loan) with a purpose:

• Better conditions: When you acquire a motorcycle, you gain an asset that can act as a kind of security. You are not just spending money; you are exchanging it for another asset. This can positively affect the credit assessment and thus improve your conditions for a motorcycle loan.
• Tailored offers: If banks know the purpose of a loan, they can present tailored offers that meet your needs precisely.

If you are interested in financing a motorcycle, contact us. Together we will find a purpose-bound small loan that perfectly matches your needs and offers very favourable interest rates.

Bridge loan – overcome financial bottlenecks with a small loan

Small loans are also well suited to bridging financial bottlenecks. Many people usually use the overdraft facility on their current account for this. However, this is usually considerably more expensive and causes unnecessary costs. A small comparison calculation illustrates this in more detail:

Table 1: Cost comparison between an average small loan and an overdraft facility

In this example the overdraft is not repaid at all initially. This is possible because there is no fixed repayment and you as the borrower can choose the repayment yourself. The interest would therefore decrease somewhat even with the overdraft if you made regular repayments. Still, the interest costs would then be 157.61 euros and thus almost twice as high as with an average small loan.

Wedding loan – the small loan as pre-financing

Although weddings are still rarely financed with a loan today, such a step can certainly be worthwhile. Many couples quickly lose control of the costs at a large celebration. The following cost items are particularly significant:

• Venue (several hundred to several thousand euros)
• Catering (between 20 and 100 euros per person plus drinks)
• Band or DJ (between 200 and 1,200 euros)
• Wedding dress (a few hundred up to several thousand euros)
• Wedding rings (100 to 1,000 euros)

The hesitant attitude of many couples towards taking out a wedding loan is understandable, as nobody wants to start their life together in debt. Fortunately, this is not necessary, as the following example calculation shows:

Table 2: Financing possibilities for a wedding loan

If you choose a small loan as a wedding loan, you use it primarily as pre-financing, since a large part of a wedding celebration is often covered by the guests. Most couples today no longer want household gifts (the household is often already complete), but rather indicate in the wedding invitation that they prefer cash gifts. To use the wedding loan as cost-effectively as possible, you should definitely choose a loan that allows free early repayment. Such loans are relatively easy to find today.
After the wedding you can simply transfer a large portion of the cash gifts to the bank and save a lot of interest. In the above example there is even enough left for a honeymoon.

Choosing a small loan – what to watch for in the terms?

Are you interested in a small loan but want to prepare before choosing one? No problem — we explain which decision criteria are particularly important for a small loan:

1. Effective annual interest rate

Even for small loans, the effective annual interest rate is the most important comparison criterion, as it determines the costs you will bear for the desired financing. It is important not to confuse the effective annual rate with the nominal rate. While the nominal rate only reflects the interest costs, the effective annual rate also includes numerous ancillary costs of a loan. The calculation of the effective annual rate is defined in §6 of the Price Indication Regulation (PangV) and therefore also includes the costs for:

• The brokerage of a loan
• Account maintenance fees (if required)

Costs that are not mandatory parts of the loan contract are not included. These include, for example, the costs for a residual debt insurance. To always get the best regarding interest costs, you should definitely use a loan comparison. The following example calculation shows what this can achieve:

Table 3: Saving potential through comparing different small loans

As you can see, the saving potential by choosing a low-interest small loan is quite attractive. In the above example you can save over 200 euros in interest over two years. We help you with the loan comparison and together find the small loan that suits you best!

2. Optimise the term

The term fundamentally affects two important values:

• Repayment instalment: The longer the term, the lower the monthly instalment. This is easy to understand, as the loan amount is spread over a longer period.
• Interest costs: Unfortunately, a longer term also increases the total interest costs. This is because you borrow the money for a longer period and therefore pay interest for a longer time.

Therefore, when optimising the term, the recommendation for you is to choose the term as short as possible. However, you should always keep your financial capabilities in mind. Consider in advance the maximum monthly amount you can repay and set the desired term accordingly.

3. Other important features

In addition to low interest rates and an optimised term, you should also pay attention to other service features when looking for a suitable small loan. These are not always important but depend on your individual circumstances and the intended use of your small loan. They are explained below:

• Free special repayments: When you take out a small loan, the repayment is usually fixed. However, if you have the option of making repayments beyond the agreed instalments, this is referred to as special repayments. Normally such special repayments or an early repayment result in a prepayment penalty (up to 1% of the amount repaid early). Today there are more and more providers that offer free special repayments and thus allow you to reduce your interest costs through additional repayments. This is of course only interesting if you actually have the corresponding funds.
• Free payment holiday: Whether a small loan or a larger instalment loan – all loans are essentially a fixed payment obligation in the future. Unfortunately, the future is only partially predictable, and financial bottlenecks can occur. In such a case, a payment holiday helps to ease the financial burden for a month. Some small loan providers offer loans with a corresponding payment holiday (once a year).
• Fully digital application process: Do you need the money from a small loan particularly quickly? There are providers today that enable a fully digital application for a small loan. You do not have to send the loan contract and documents by post, but can upload everything online to the bank and sign the loan agreement using a qualified digital signature. Ideally, you can receive your money within 24 hours.

A closer look at the services and terms of individual small loans is therefore worthwhile. For you, it is above all important to formulate your specific needs regarding taking out the loan in advance. Based on this information we can together find the small loan that is perfectly tailored to you.

Applying for a small loan – preparation and process

If you have decided on a particular small loan, the application phase begins. The main questions here are whether a loan can be granted at all and what documents you need to submit.

What requirements must I meet for a small loan?

The requirements for a small loan usually hardly differ from those for conventional instalment loans. In addition to legal requirements such as a permanent residence in Germany and being of legal age, the key question is whether you are able to repay a loan as agreed. For this purpose, (as a rule) two requirements must be met:

1. Sufficient income
To successfully repay a loan you need a secure income of sufficient size. For this reason it is important that you are in a permanent employment relationship outside the probationary period. Furthermore, your income should be well above the garnishment exemption limits (as of 2018: 1,139.99 euros). Of course, the number of people in your household and your expenses also play an important role. Many banks, however, use their own statistical models for expense calculation to assess, based on your income, whether a loan can be granted from a financial point of view.

2. Clean SCHUFA report

A conventional small loan also requires a clean SCHUFA report. Negative entries are an exclusion criterion for many banks when granting a loan. If you have a negative SCHUFA entry due to unpaid bills or a sworn affidavit, a small loan without SCHUFA can help.

What documents are required for a small loan?

Because small loans usually involve relatively low loan amounts, the document requirements are often not as extensive. Normally the following are sufficient:\

• Payslips for the last two months\
• Proof of permanent employment (e.g. employment contract)
  In individual cases a bank may also want to see some account statements.

  

Applying for a small loan – this is how it works

To receive the loan amount of a small loan, you must of course apply for it first. Only the following steps are required:

1. Enquiry with MAXDA
So that we can find the perfect small loan for you, we first need some personal information and contact details. In addition, data about your employment and income situation are important. Based on this information and your desired loan details, our experts can search with a comprehensive loan comparison for offers with the best possible conditions for you.

2. Application to the selected bank
If we have found the most favourable small loan with the desired features for you, the next step is the online application with your provided data. We send this to the bank and receive an instant answer as to whether a loan can be granted.
3. Sign the loan agreement and submit documents
Next, the loan agreement sent by the bank (often by email) must be signed. In addition, the documents mentioned above must be attached. These serve to substantiate the information you provided about your income and asset situation.

4. Complete the identification procedure
Since there is no direct contact between the bank as lender and you as borrower for an online small loan, identification of your person is required. There are two common procedures available today:

• Postident procedure: You receive a coupon from the bank and go to the nearest post office with it and your ID card or passport. There an employee completes the Postident procedure.
• Videoident procedure: You receive a video call from a postal employee and must hold your ID card next to you in front of the camera. This also verifies your identity. At the end you receive a PIN by SMS to confirm the video chat.

5. Receive and use the loan amount

You can usually expect the loan amount within a few days. It is credited to your current account and is then at your disposal.

Is a small loan without SCHUFA also available?

If your SCHUFA report contains a negative entry, it is often very difficult or impossible to obtain a conventional small loan. Fortunately, we also work with specialised lenders who enable a small loan without SCHUFA.

What requirements must I meet for a small loan without SCHUFA?

There is a lot of misinformation in the area of loans without SCHUFA, often spread by dubious providers. Contrary to what some advertisements claim, you cannot obtain a small loan without SCHUFA if your overall creditworthiness is poor. Such a loan only has the particularity that the lenders waive a SCHUFA report or it is not an important criterion for the lending decision. Nevertheless, you must meet certain requirements for a SCHUFA-free small loan:

• Regular and secure income (all the more important)
• Residence in Germany (a very common condition)
• Legal age
• Permanent employment outside the probationary period

If you have a steady and regular income above the garnishment exemption limits, the chances of getting a small loan without SCHUFA are pretty good. Contact us! We look forward to finding your perfect SCHUFA-free small loan together.

Who is a small loan without SCHUFA suitable for?

Because banks have a worse information base about your creditworthiness with a SCHUFA-free loan, such loans are rated as riskier. This usually means higher interest rates than for conventional small loans. For this reason, you should only consider this alternative if you really urgently need money. In that case, a small loan without SCHUFA is a viable option that can offer reasonably solid conditions. In addition, there are two other groups of people for whom such small loans may be suitable:

• You do not want the loan to be reported to SCHUFA and thus accessible to other contracting parties. Taking out a loan under the radar can make sense to avoid worsening the conditions of other contracts.
• You generally do not want to pass on data to credit agencies and thus wish to live more independently.

In all these cases we help you find the small loan that fully matches your wishes and needs.

Frequently asked questions about small loans

Below we answer some questions that are frequently asked about small loans:

Is a small loan possible during unemployment or while receiving Hartz 4?

When unemployed or receiving Hartz 4, people often quickly face the problem of needing money. Unfortunately, basic social security under Hartz 4 is not considered assessable income and therefore cannot practically be garnished. Without your own income as security, a loan is generally not possible. However, there is the option of obtaining a loan with a second borrower or a guarantor. This person must themselves have sufficient income.

Can a small loan also be applied for with a guarantee?

In principle, it is possible to apply for a small loan with a guarantor. Because of the low loan amounts this is rare but not excluded. A guarantor must, however, be prepared to provide a self-debtor guarantee. This means they waive the defence of prior enforcement according to §773 para. 1 no. 1 BGB and cannot refer to the fact that the bank must first sue the borrower. The lender can therefore immediately call on the guarantor in case of payment difficulties.

Can I get a small loan as a student?

Although students often find it hard to get a loan, the situation is somewhat different with a small loan. It depends on the individual circumstances:

• Loan amount: Very low amounts of 500 to 1,000 euros are likely easier to obtain than a small loan of 3,000 to 5,000 euros.
• Income level: Many students receive support from their parents and also have a part-time job. If this is sufficient, a small loan with a low amount could be possible.
• Bank scoring: Banks use different scoring systems. Depending on the risk assessment, you may receive a small loan from one bank while being rejected by another.

If you want to be on the safe side as a student, you should include a second borrower. If your parents take out the loan with you, there are usually no major problems given their creditworthiness.

Feel free to find out with our loan calculator

Is a small loan possible during personal insolvency?

If you are in personal insolvency and have applied for discharge of residual debt, taking out a loan is more than problematic. On the one hand, creditworthiness is usually not sufficient and banks almost always refuse the loan. On the other hand, taking out another loan could upset your creditors.
Caution: Taking out a loan can, under certain circumstances, also jeopardise your personal insolvency proceedings. According to §290 para. no. 4 of the Insolvency Code, creditors can apply for refusal of the discharge of residual debt if the debtor has incurred unreasonable liabilities.

Is instalment purchase an alternative to a small loan?

In principle, a instalment purchase for consumer goods is not much different from a small loan. By using instalment purchase you, as a borrower, restrict your options:

• Financing must be done through the retailer’s financing partner
• No possibility to compare different lenders
• Possibly worse terms than with a bank

If you are thinking about financing the purchase of a consumer good, it is advisable to compare various loan offers beforehand and compare them to the instalment purchase offer. This way you will see where you get the better conditions.

What is the difference between a small loan and a mini loan?

At first glance it may not be easy to distinguish a small loan from a mini loan since both are aimed at low loan amounts. However, there are differences:

• Term: Mini loans have much shorter terms of 30–180 days and are therefore sometimes called short-term loans.
• Use: A mini loan is actually only a financing option for a very short-term bridging of small bottlenecks. A small loan can also be used to finance purchases since terms of 1–2 years can easily be agreed.
• Requirements: Because the loan amount for a short-term loan is significantly lower, the granting criteria for mini loans are often somewhat looser. New customers can initially only obtain very small loan amounts, but this can increase if they prove their payment reliability even with a negative SCHUFA entry.

Conclusion: Find an affordable small loan today!

Small loans are a practical way to overcome smaller hurdles in everyday life. Whether it’s an important car repair, a replacement for an essential household appliance or financing an important event such as a wedding or a holiday – with a suitable small loan this is no problem. Our loan comparison helps you find a small loan that meets your wishes and is also very affordable. Contact us today and start saving a lot of money on borrowing!
Also use the Maxda loan calculator