The emergency loan

Loan applications are normally a lengthy matter. Processing can drag on unnecessarily and weeks, months or even years can pass before the loan amount is paid out — even if that’s a slight exaggeration, it can sometimes feel that way. How often do unexpected circumstances put you in a tight spot and you need money quickly and at short notice?

A very everyday situation. You reach boldly into the fruit bowl for a peach and feel nothing amiss. Ouch — you hit the pit hard. After the pain comes shock — a tooth has broken. That will be expensive! Health insurers have long since stopped covering all costs. If you still want to smile with natural-looking teeth, you usually have to pay yourself. It doesn't always have to be a medical incident. Maybe your car breaks down on the way to an important appointment. The car just stops — now what? The necessary repair costs are far higher than expected?

This can happen to anyone and it always comes unexpectedly. These are additional expenses you simply don't plan for. Suddenly you face a situation that tears a hole in your wallet. Usually the financial means are then lacking. So what to do when you urgently need more than a few euros at very short notice? The money is needed fast and the payout must not take weeks. This is where the so-called emergency loan comes into play.

What is an emergency loan?

From the loan application to the payout, an emergency loan usually takes only a few hours. That sounds fantastic and uncomplicated and can really save your day.

But how can that be? Is such an express loan reputable? Yes, it is. The emergency loan is nothing more than an ordinary installment loan, only the approval is given faster and the money is paid out sooner. The instant loan is not tied to a specific purpose. The money can be used for whatever it is needed for.

The emergency loan is also called an instant loan, lightning loan or express loan. And that describes it well. The money is with the borrower in no time when they need funds at very short notice. This works without lengthy processes, so handling is quick. Loan request or application is submitted online, checked, approved, money transferred — that’s how it can go.

With a regular installment loan it usually takes several days to weeks before you can actually access the additional money. With an emergency loan you can calmly sit in the dentist’s chair and have your front teeth repaired — immediately. Who wants to smile for months with an obvious gap in their teeth?

If you now think that you will be tied to long repayment terms, you are mistaken. You get an emergency loan quickly and you can also repay it promptly. Repayment of the loan usually occurs within the following 30 days. But terms of up to 120 months are also possible.

How does an emergency loan work?

The instant loan is a classic installment loan, with the difference that after the loan request the bank or lending institution approves the loan much faster. A normal installment loan is usually approved within a week. But the money is not yet in the account. It usually takes a week for the formalities to be checked and for the lender to find out whether the borrower is capable of fully repaying the borrowed money. For that they obtain information on creditworthiness from Schufa. Time passes until the requested amount finally appears in the customer's account — often felt to be too long. It’s different with the rush or quick loan.

With an emergency loan the loan request is usually submitted online. All important personal data are entered into a form. Lenders ask about financial circumstances, i.e. the job and whether any other financial securities exist. These details are weighed against expenditures. The borrower is therefore asked to state the costs for household management and other expenses. Income and expenses thus become clear. In a loan calculator you enter the desired amount and set the number of months until the loan should be repaid. That is sufficient to apply for and often to be approved for the instant loan. The review begins as soon as the application has been transmitted to the lending institution. Once this is done, identification is still required. Everyone must identify themself in a specified way and make it clear that they submitted the application. Then the required documents are uploaded.

Behind the scenes bank staff and systems work at full throttle. That is how the instant approval for the emergency loan is possible. Once this occurs, the requested amount is usually transferred to an account within 24 hours.

Time deposits, guarantees or a second borrower have a positive effect on the decision whether the requested amount will be available soon. However, they are not a prerequisite for banks to approve the small loan. How do banks and lending institutions protect themselves? They agree on an assignment of wage and salary claims. That means the person who urgently needs money pledges these earnings. If they fail to pay several installments in a row, the bank can collect these — up to a certain amount that the borrower still has available to live on. That is, up to the so-called garnishment exemption limit.

Step by step to an emergency loan

Is it really that easy to get an emergency loan? Here’s how:

1. Determine the loan amount

What sum is needed? And for what purpose?

2. Set the term

How quickly will the amount be repaid?

3. Review details and special conditions

Any special requests? Is an instant approval needed for the emergency loan? Is the emergency loan for a freelancer or self-employed person? Does someone want to arrange special repayments or payment breaks? These questions are clarified in this step. You should also indicate here that you need the loan immediately.

4. Submit the quick loan application

Simply fill out the straightforward online form and submit it. The loan request is free and non-binding. As a rule, this does not affect the Schufa score.

5. Provide further data

You will receive a preliminary approval in the shortest possible time. Now details about salary, employer and expenses must be itemized — and proven with the appropriate documentation.

6. Send the data

Is everything correct? After a careful check the information is transmitted promptly online and reaches the lender in a matter of seconds.

Requirements for an emergency loan

Who receives an emergency loan?

Is someone selling their moped cheaply right now? And the 16-year-old thinks they must have it? Right now? If they think they can finance it with an emergency loan, they will be disappointed. As with other loans, being of legal age is a basic condition to apply for such a loan. This also includes having a permanent residence in Germany and possessing a German bank account.

Banks and lending institutions usually grant quick loans to employees who can prove a permanent employment contract. Civil servants with lifetime tenure and employees in the public sector can also apply for the express loan. Some lenders set an age limit. For some it is 60 years, for others higher. Older people can also receive an emergency loan, but they usually must secure it with residual debt insurance.

The emergency loan is granted quickly and is usually repaid quickly. Therefore many lenders set a minimum income. Only with this can they be confident they will get their money back. For some providers the lower limit can even be €500. Usually the range for the necessary net income is between €1,200 and €2,500. This depends on the legally stipulated garnishment exemption limits. The amount varies because the bank must also take into account the number of people living in a household.

Income is proven by payslips. Important: If someone has been employed at their current job for less than six to twelve months, it becomes more difficult to obtain an emergency loan. In addition to payslips, lenders require an overview of all income and living expenses. For this, bank statements for the last three months must be provided.

Emergency loan for the self-employed

If you work self-employed, you know: it is always a bit more difficult to get a loan. Lenders are more hesitant to grant a loan. If you also need money very quickly and at short notice, you must provide additional documentation beyond the requirements already mentioned. Lenders consider freelancers and the self-employed to be higher risk. They protect themselves in case the borrowed money cannot be repaid. Therefore they usually grant emergency loans only to entrepreneurs who have been operating consistently for at least three years. If you have the corresponding balance sheets and papers ready, you have an advantage. The business management evaluation (BWA) is required — usually the current one and often the one from the previous year. Banks also usually request the annual financial statement or the profit-and-loss account and the income-expenditure statement (EÜR) for the last two years. This allows them to form a picture of the self-employed person and decide whether to trust them or not.

Emergency loan despite Schufa

Who would have thought? You get an entry in the Schufa faster than you think. Well for those who pay their bills on time. Is the amount still outstanding after the first reminder? That does not yet affect the Schufa score. If you do not pay after the second written reminder, you receive an entry in the Schufa register — if at least four weeks have passed between the first and the second reminder. But don’t worry: you can obtain an emergency loan even with a mildly or moderately negative Schufa score. The lightning loan is offered by some providers as a loan without Schufa. No information is requested from Schufa or the loan application is not recorded with Schufa.

Requirements for the emergency loan — briefly explained

• Legal age
• permanent employment contract or
• civil servant with lifetime tenure or
• employee in the public sector
• not older than approx. 60 years
• presentation of payslips
• listing of income and living expenses
• for the self-employed: business management evaluation (BWA) or income-expenditure statement (EÜR) and profit-and-loss account (P&L) as proof

What are the conditions for an emergency loan without Schufa?

A quick loan can also be granted without obtaining information about the borrower from Schufa. So it is possible as a loan without Schufa if that is desired. At the same time this avoids an entry at Schufa. The current Schufa score remains unchanged and does not deteriorate. Why is that important? If you plan to build a house or modernize your apartment in the foreseeable future, it is important to remain solvent and creditworthy. With the emergency loan without Schufa you keep your current creditworthiness. The emergency loan that eliminates a short-term financial bottleneck does not worsen your ability to pay.

If you know your Schufa score is poor, you usually have the option to offer additional collateral. For example, if you find someone to take the loan with you, you will obtain it more easily. The risk for the lender is then distributed between two people, reducing it.

Schufa-free emergency loans usually cost a bit more than lightning loans where Schufa is queried. Lenders protect themselves. They factor in the higher risk that their money might not be repaid. That is reflected in the interest rates for the quick loan. You pay higher interest.

Is the emergency loan tied to a specific purpose?

Does the car need to be repaired as quickly as possible because the commute is impossible on foot or by public transport? Is the dentist offering particularly favorable terms for implants that must be accepted quickly? Or does your heart almost leap because today the bargain of the day at the local electronics store is the washing machine you want?

For buying a new car or a house it makes sense to apply for a purpose-bound loan to get the best possible terms.

For unexpected things in life — like a car repair, new teeth or a new washing machine — there is the emergency loan. It is not purpose-bound. How the loan is ultimately used is up to the borrower.

What does an emergency loan cost? What should you watch out for?

Nothing is free — and neither is money. Borrowing costs money. You might assume that whoever needs something very quickly will pay a bit more for it. Certainly, but the costs for an emergency loan are not necessarily higher than for an installment loan. Interest rates for an emergency loan generally start at around 3%. They can, however, also be as high as 16%. Even so, it is cheaper to use a lightning loan than to constantly overdraw your overdraft up to the limit — or even beyond. Overdraft rates are extremely high. An emergency loan protects your current account.

If you need a relatively small amount of money at short notice, the emergency loan is a good alternative to an overdraft. Financial experts often refer to this as a small loan.

Fast, unbureaucratic and inexpensive — these are the qualities often associated with the emergency loan. With reputable providers that is true. The interest rate is not only significantly lower than with an overdraft. The repayment costs are fixed for the entire term. Are additional processing fees charged by a provider? Walk away! There can be ancillary loan costs, that is correct. However these are taken into account in the annual percentage rate. They are not billed separately. The costs for residual debt insurance should also be included here.

Is someone over 60? They must expect that loans are no longer as easy to obtain. If they are willing to take out residual debt insurance, their chances of approval increase. Insurance premiums in turn increase the total cost of the loan.

The emergency loan is intended to be repaid quickly so that debts do not accumulate and you can get rid of them immediately. Both borrowers and banks are happy about that. If you want to repay your loan early and pay back the borrowed money in full: caution! Early repayment fees often apply. The bank charges for the loan to be repaid before the agreed term.

Advantages and disadvantages of an emergency loan

What are the advantages of an emergency loan?

Fast and unbureaucratic. You certainly don't have time when financial worries weigh heavily on you. Then you need quick action. So that the car can be repaired as quickly as possible. So that a new washing machine can be ordered. So that the dentist appointment for the implant can still be confirmed today. With an emergency loan the time until loan confirmation is drastically shortened. The application is sent online and the bank makes a preliminary decision immediately. If you send the requested documents right away and can provide proof of the stated information, you often receive the money within 24 hours.

Unlike purpose-bound loans, instant loans also often allow special repayments and payment breaks. You should indicate this when you submit the application. Is your Schufa score not perfect? That usually does not prevent loan approval. If you can offer a time deposit or life insurance as collateral, you will usually get approval more easily. Direct banks have lower costs than branch banks. They pass these on to their customers through more favorable terms, also for emergency loans.

Advantages — briefly

• Fast loan approval
• Special repayments possible
• Payment breaks possible
• Collateral such as time deposits or life insurance speed approval
• possible despite Schufa
• instant payouts within minutes possible
• no additional costs
• often favorable conditions

Are there disadvantages to an emergency loan?

What do I have to do? Are my securities sufficient? What documents do I need? How does the bank get them? Where can I even submit the application? Is the emergency loan suitable to solve my financial dilemma? If you are unsure whether the quick loan is the right product for your needs, you must inform yourself and compare. There is usually no personal advice because most offers are found online. That is actually the only disadvantage of the lightning loan. But if you know what you want, you get the emergency loan quickly and without complication.

Another problem is that under pressure people often make hasty decisions — without informing or comparing beforehand. Unscrupulous providers like to take advantage of that. So be cautious if the money is available extremely quickly but is accompanied by extremely high interest rates. Or if various other additional costs are included. You should probe and check thoroughly even when the offered rates seem very low. The seemingly cheap offer often turns out to be a financial trap with expensive combinations of advisory fees, administrative costs and an effective annual rate.

If you want to be sure Schufa is left out, an emergency loan without Schufa is a good option. But even here: if someone cannot pay their installments, Schufa will find out. That applies even if the loan was granted without a Schufa inquiry or entry.

A reliable loan without Schufa is available here at MAXDA. We rely on many years of experience and cooperate only with established and reputable banks and lending institutions in Germany and across Europe.