Borrow money, but from whom only?

Whether it’s a broken refrigerator or an urgent car repair – larger expenses usually come in the financially unfavorable moments. Consumers who do not have sufficient reserves inevitably face the question of who they can borrow the much-needed money from. Many come first the well-heeled relatives, better-earning or the house bank in mind. Depending on the situation, these can be the right contacts, but what if the loan from the house bank is out of the question, for example because of a negative entry in the personal Private credit file? Even in these situations, there are many ways to borrow money. Find out what these are and what you should consider when making loans from various lenders here.

Credit request at the house bank or another bank

Company loans

If you want to bridge a financial shortage with a short-term loan, you can confidently turn to your bank. Find the interview with your local banker and let them know about the possibility of borrowing. However, consider well in advance what the required amount of the loan should be, the duration of the loan and how high the monthly installment should be. All these aspects have an impact on the cost of the loan. The higher the loan amount and the longer the term, the higher the interest that has to be paid in total. However, with a reduction in the running time, the monthly rate increases and this should definitely be calculated realistically. First, make a comparison of your monthly spend and revenue. Once again, deduct a certain part of the resulting difference for unforeseen costs (experts recommend at least 150 euros). The balance is the maximum amount that can be raised for a loan installment.

However, the interest rate itself usually depends on the creditworthiness of the borrower, which in most cases is requested by the Private credit. The better the credit rating (and thus the credit rating), the lower the risk of the bank and therefore the interest rates are lower. In addition, the loan rate differs considerably from bank to bank, so it makes sense to compare the offer of the house bank with other offers. Direct banks often offer the more favorable terms, but you also have to do without the personal advice that a branch bank offers. Depending on whether you want a branch bank or a direct bank as a lender, or have no preference, you should make an appropriate online loan comparison. Such a comparison is offered by numerous platforms free of charge and shows you in the blink of an eye the cheapest loans that have been selected based on your information. The comparison allows you to save several hundred to thousands of Euros depending on the loan amount. But consider not only the cost of a loan, which is reflected in the APR, but also the terms of the repayment.

Advantages:

– fast availability of money,
– not normally earmarked, but freely available,
– Repayment plan with high planning certainty (interest rate and repayment fixed from the beginning).

Disadvantage:

– Grant and interest rate usually credit-related,
– Credit is reported to the Private credit and thus affects even the credit rating,
– early redemption partly only against fees (prepayment penalty)

Credit from friends or relatives

Employers loan

For example, if a regular loan from a bank is not possible due to poor credit ratings, friends or relatives may be asked for a short-term loan. This is usually much less complicated than a loan request from a bank. Above all, the personal relationship and the elimination of the credit check, including a look into the personal file of the Private credit, the chances to get the required amount, very good. However, a request from friends, relatives or acquaintances should be well considered. If you borrow money from a person you know, you should make sure that the general conditions of the loan are always recorded in writing. Although it is by law quite permissible to arrange a private loan orally. But if, contrary to expectations, there are disputes, both sides have nothing to appeal to. A contract for a private loan does not have to be a legal masterpiece, it is sufficient if the most important data such as the name of the borrower and the lender, the loan amount, the agreed term and the method of repayment (monthly installments or an amount?) Are included.

Advantages:

– no credit check or additional collateral,
– Interest and repayment is agreed individually
– Premature replacement is possible at any time.

Disadvantage:

– usually only small loan amounts possible (up to a maximum of 10,000 euros),
– Credit can be terminated at any time (notice period: three months),
– Disagreements over the credit affect the personal relationship.

Employers loan

Not only friends, acquaintances and relatives are potential lenders, but the employer can also take a loan in times of financial shortage. Most companies granting an employer loan do not base the grant on the employee’s credit rating, but on other factors such as their position in the company, length of service, and level of salary. In the case of an employer loan, sometimes referred to as a staff or employee loan, the employee receives a certain sum as a loan and has to pay it back in regular installments. This can be done either by transferring the agreed amount or by deducting the loan installment directly from the monthly salary. In order to avoid disputes, it is strongly advised to record the loan agreements in a contract. Specifically, the contract should include the loan amount, the agreed interest rate, the repayment modalities and, if desired, the intended use. If no repayment agreements are made, the employer is entitled to terminate the loan upon termination of the employment relationship of the borrower. In this case, the entire sum must be repaid within a period of three months.

Employee or employer loans are also tax relevant. Employees must indicate in the tax return the monetary benefit they receive from the low-interest loan. On the employer side, it should be noted that the interest earned on employee loans is included in operating income and must be reported accordingly.

Advantages:

– very low or no interest,
– trust and loyalty to the company instead of credit check and collateral,
– flexible repayment terms.

Disadvantage:

– Employer gets insight into the financial situation of the employee,
– Credit is tied to employment (immediate repayment on termination),
– Interest advantages must be stated as monetary benefits in the tax return.

Peer-to-peer credit through online platforms

If credit to the bank is not possible due to negative Private credit entries and the financial support of friends, relatives, acquaintances and employers is out of the question, a loan seeker has the possibility to apply for a loan privately via special online platforms. Here are potential credit ¬†and borrower. Loan seekers can use these peer-to-peer (P2P) credits to obtain their desired amount without having to meet banks’ strict award criteria. Here they just have to describe their intention or the reason for their search for credit, and then their concerns are examined by the operators of the platform. If successful, the interest rate for the loan request is determined and the request is published. Now interested investors can offer a portion of the loan amount as a loan and once the desired amount is offered at 100 percent, it will be paid to the borrower. The repayment takes place analogously to the conventional bank loan in monthly installments.

Advantages:

– no fixed award criteria, usually without Private credit query,
– will not be reported to Private credit,
– also original and innovative uses possible.

Disadvantage:

– from request to authorization (= enough investors) it can take a long time,
– fees are charged for mediation or account management,
– some higher interest rates than bank loans.