General information on loan requirements

Many people take out one or more loans during their lifetime when they have a loan requirement and cannot cover certain costs on their own. The common purpose of all loans is to have a larger sum of money available in the short term, for example to be able to finance a new purchase. The customer, i.e. the borrower, therefore applies to a bank or another lending institution for a loan of a certain amount. This loan amount is then repaid to the lender by the customer in a contractually agreed manner. This principle is common to all loan offers.

However, the contract details, the amount of the loan and the interest to be paid, and the purpose of taking out the loan can be very different. Before you inform yourself about loan offers and compare different products, you must determine your own loan requirement and consider whether the total cost of the loan can be covered by your own monthly income. If necessary, the amount or the monthly installments must be adjusted accordingly.

What does the loan requirement include?

The loan requirement consists of two things:

1. On the one hand, you need to know what the loan is needed for. Depending on the use of the borrowed money or the collateral you can provide as a customer, there are very different offers and financing options.
2. The second component important for the loan requirement is the loan amount. The amount of money borrowed can have a huge impact on the terms of the loan agreement. Some loan offers apply only for or up to a certain loan amount. These must then be reconciled with your own expectations.

   

The loan amount and the purpose of the loan thus together form the individual loan requirement. Once this has been determined, you can look on the market for a suitable loan offer. For all categories, from mortgage loans to small loans, there are very different concepts and offers that should be examined and compared.

Loan requirement for personal loans

The simplest of all loans in terms of attachment to specific collateral is the personal loan. It is granted to private borrowers and can be used for any desired purpose.

Only the customer's creditworthiness decides on the loan approval. No collateral needs to be provided, although it can be offered to improve creditworthiness.

Personal loans are available in any amounts. This category particularly includes small loans that range between 1000 EUR and 5000 EUR. So if you have a small loan requirement, for example to bridge a temporary financial shortfall or for a minor purchase, you can browse these offers and will definitely find a suitable one.

Often a small loan is offered at special conditions already at the time of purchase of a specific item. For example, furniture stores or electronics retailers often offer the option to finance the purchase on very favorable terms. In such cases the loan requirement is directly tied to the corresponding invoice. What is bought in the store is then financed under the favorable conditions.

If you look closely in the small loan sector, you can conclude very affordable loans. But even personal loans with a higher loan requirement can be obtained at good rates through comparison.

For companies there are completely different types of loans. These loans for businesses are also called corporate loans and belong to commercial lending. Commercial loans aim to finance business investments. Examples of loans that companies can take out include investment loans and supplier credit.

The car loan

Another popular area for loans is car loans. They have the great advantage for lenders that the loans are tied to a concrete value, namely the car. The buyer pledges the vehicle registration document and thus the vehicle itself to the lender. This ensures that the lender receives the loan installments as agreed.

If this does not happen, the lender can realize the value, i.e. sell the car. Therefore a car loan is generally easier to obtain than a pure personal loan that cannot or does not have to be directly secured by collateral. The loan requirement is of course based on the purchase price of the vehicle. It is directly tied to that value. Nevertheless, it is advisable to carefully check the loan requirement in this case as well.

If equity is available, it can be used in the form of a down payment. This of course reduces the loan requirement and leads to a lower monthly burden or a shorter loan term. Depending on your needs and possibilities, this can be a significant advantage.

It is important that when financing a car the value is also protected by comprehensive insurance (Vollkasko). That way, nothing stands in the way of a new car, for example because the family is growing or because it is finally the long-awaited dream car.

Loan requirement for mortgage loans

Another category of loans is the mortgage loan or property financing, which can also include construction financing. Here the loan requirement is usually very high. Buying or building a property is a very costly matter. Not only the purchase price itself, but also incidental costs such as notary or broker fees must be covered.

When determining the loan requirement for real estate, total costs of 110% of the purchase price or construction costs are therefore taken into account. The terms of the mortgage loan or construction financing depend heavily on the so-called loan-to-value of the property. The loan-to-value is the percentage resulting from the 100% costs of the property and the actual loan requirement.

If you have a lot of equity that can flow into the property, the loan requirement is correspondingly low. The loan-to-value of the property then decreases. Most lenders finance a property up to 100% of the purchase price or construction costs. But offers that finance the full amount of 110% can also be found on the market.

A high loan requirement here also means higher interest rates. In property financing, the property itself serves as collateral for the bank. This is secured by registering a land charge (Grundschuld). As with a car loan, it is important here as well to adequately insure the value, i.e. the property.

The right solution for every loan requirement

These examples already make it clear that there are numerous variants of loans. In every life situation it can be necessary and also sensible to take out a loan. Whether as a student to finance your studies or as a homeowner to carry out renovations, there is a suitable loan for every loan requirement.

A loan is granted with good creditworthiness, which in Germany means an appropriate household budget calculation and a clean file at Schufa. But even if there are problems with Schufa, which are often not even your fault, a loan is not excluded. Loans without Schufa information can help in such cases.

These loan offers often come from abroad. Here creditworthiness is determined solely on the basis of the household budget, i.e. income and expenses. Swiss loans are particularly well known and have proven themselves in many cases. Often taking out a loan to bridge a shortfall is more sensible than hoping for another solution.

If you conscientiously and individually determine your loan requirement and choose a matching loan offer, nothing stands in the way of a secure loan drawdown and contract processing.