Personal Loan In Germany [2024 Expats Guide]

Key takeaways

• Expats with valid visas and stable income sources can get a personal loan in Germany.
• When assessing your creditworthiness, banks consider factors like your Schufa score, income, expenses, types of insurance you have, existing loans, etc.
• Getting a personal loan makes sense if you plan to invest the loan amount in an asset that grows in value over time or if you need it to improve your life. 
• The maximum personal loan you can take depends mainly on your income and expenses.

This is how you do it

• Compare the personal loans on comparison portals Smava*, Finanzcheck*, Check24*, and Verivox*.
• Don’t take too many loans that you are unable to repay.
• Calculate the total loan cost of different loan offers before taking one. Interest rate is not the only factor contributing to the loan cost. Other factors include commissions, insurance costs, etc. Moreover, check the total interest you’ll pay over the loan term instead of the interest rate.
• Banks use different interest rate calculation methods. So, check carefully how much total interest you’ll pay over the loan term.

Table of Contents

Can foreigners get a personal loan in Germany?

Yes, foreigners in Germany with a resident permit can get a personal loan. However, you must fulfill other requirements to be eligible for a loan in Germany.

• You must have a permanent residence card (Niederlassungserlaubnis). Blue card holders can also apply for a personal loan but pay higher interest rates than permanent residence card holders.
• You must have a source of income from a job (preferable) or self-employment.
• You must be at least 18 years old.
• A German bank account where the loan will be paid.
• A good Schufa score helps improve loan conditions.

How can you get a personal loan in Germany?

• Assess the maximum monthly installment you can afford. To do that, subtract your total monthly expenses from your net income. The amount is the maximum monthly installment you can afford.
• Compare private loans on comparison portals like Smava*, Finanzcheck*, Check24*, and Verivox*.
• Enter your personal details and get unbinding offers from different banks.
• Apply for a loan that offers the best conditions on the portal.
• Check the interest rate, how the interest is calculated, and other terms carefully.
• Sign the credit contract and send it back.
• You’ll get the approved loan amount within a week after signing the contract.

NOTE: You can compare as many offers as you want on comparison portals, but apply for the one that you find the best. Never apply for multiple offers on the same or different portals. It affects your Schufa score negatively.

Different portals where you can apply for a personal loan in Germany

Comparison portals that show loan offers from different banks

• Smava*
• Finanzcheck*
• Check24*
• Verivox*

Portals that show loan offers from private individuals and institutional investors.

• Auxmoney*

Portals that offer small loans for short periods

• Cashper*
• Vexcash*
• Ferratum*

How do German banks assess your creditworthiness?

Creditworthiness is all about evaluating the probability of getting the loan back. The German banks consider everything that affects the risk of loan repayment when assessing your creditworthiness.

• Schufa score (Credit score): Schufa is a credit rating agency that collects consumer data from various sources. It provides lenders with data that they can use to assess your creditworthiness.
• Income source: Unlimited job contract improves your creditworthiness. In short, you need to have a stable income source in Germany.
• Purpose of the loan: The bank’s risk is less if you offer collateral against the loan. So, taking a car loan or renovation loan usually offers better conditions than a personal loan. Your car or house can act as collateral against the loan amount.
• Resident status: An individual with a permanent resident card or German passport is less risky than someone with a temporary German visa.
• Expenses: Banks also consider your monthly expenses, existing loans, insurance premiums, etc. You won’t get a loan if you don’t have enough money left after your expenses.

When does it make sense to get a personal loan in Germany?

There are two types of debt – good debt and bad debt.

Good debt is the debt you take to invest in an asset that appreciates in value over time. On the other hand, bad debt is the loan you take for something that loses its value over time (e.g., a car).

So, taking good debt usually makes sense. However, you should think twice when taking a bad debt. 

Other factors that you should consider when taking a loan.

• Your personal situation. For example, Suppose you need a car for work as it’ll reduce your travel time. Then, taking a car loan makes sense. However, taking a loan to buy a new car for fun doesn’t.
• Interest rate is lower than the inflation rate: Inflation reduces the net purchase value of money. So, the net value of your loan (not the loan amount) will reduce over time due to inflation. Again, you should be getting a loan to invest. 
• Return on investment is better than the interest rate: During low interest rates, you can get better returns by investing your money in the stock market or real estate. In such situations, getting a loan to invest is recommended.

In the past decades, investing in ETFs that track broad market indices, such as MSCI World, has returned an average of 8% per annum.

You can open a free depot account with Scalable Capital* or Finanzen.net Zero* and start investing.

7 Tips for getting a cheap personal loan in Germany 

• Take out the personal loan as a couple: Taking the loan as a couple doesn’t improve the interest rate, but it improves your chances and the amount of loan you can get. The reason is that the monthly disposable income increases when you apply for a personal loan as a couple.
• Use it for a specific purpose: You can save on loan costs if you use the loan amount for a contractually agreed purpose. A vehicle or property can serve as a security for the bank. Thus, indicating the purpose of your loan can improve the loan conditions.
• Special additional payments: By using special repayments smartly, you can drastically reduce the total interest paid over the loan term. Most German banks offer the option to pay an additional amount on top of your monthly installment for free. You repay your loan faster and pay less interest by paying the additional amount. In other words, early repayment of the loan can save you a lot of money.
• Avoid taking Residual debt insurance: Residual debt insurance covers the loan payment if you cannot pay due to loss of job, inability to work, or death. However, it costs extra and increases the loan cost. Thus, you should assess if you really need this insurance. Moreover, taking this insurance is optional. Some bank consultants may force you to take the insurance to get the loan. I would suggest either changing the consultant or the bank.
• Compare loan offers: Don’t take the first loan offer you get. Evaluate offers from multiple banks before deciding.
• Total loan cost: The interest rate is not the only cost you incur when you take the loan. Some portals, like Auxmoney, charge commission and monthly account maintenance fees. If you take out insurance, you must add the insurance costs. In short, calculate the total cost you pay for the loan and then decide.
• Wait until you have a permanent resident card. Compared to a temporary visa, you get better loan conditions with a permanent resident card.

NOTE: You can compare as many offers as you want on comparison portals, but apply for the one that you find the best. Never apply for multiple offers on the same or different portals. It affects your Schufa score negatively.

How much personal loan can you get?

The maximum personal loan you can get depends on your income and expenses. So, you can calculate it yourself in 4 steps.

• Check your monthly expenses by assessing your bank account statements from the past twelve months. I recommend assessing bank statements from 12 months as you make many one-time payments in a year, e.g., insurance premiums, travel expenses, etc. 
• Deduct your expenses from your net monthly income.
• The amount left is your disposable income. However, you should keep a cushion, as you shouldn’t use all the income left to repay the loan.
• Disposable income is the maximum monthly installment you can afford. You can calculate the maximum loan amount based on the disposable income, the interest rate, and the loan term.

For banks, it’s vital that you can pay back the loan. So, they prefer individuals with high disposable income.

Example.

Household Income	​+4000 €
Total expenses	-3000 €
Disposable income	+1000 €
Cushion	200 € (20% of the disposable income)
Maximum monthly installment you can afford	800 € (1000 – 200)
Interest rate	4%
Loan Term	60 months
Maximum personal loan you can get	(Max monthly installment) / (Interest rate + (1 / loan term)) 800 / (0.04 + (1/60)) = 14k (approx.)

You can also use loan calculators from the comparison portals (Smava*) to see how much of a personal loan you can afford.

What happens if you can’t pay your installments?

• You must first pay the interest for the period you did not repay your loan properly.
• The bank may terminate the loan. In this case, you must repay the loan in full.
• Legal dunning procedures and seizures may happen. As per the loan agreement, you must transfer the seizable portion of your income to the bank.
• The bank will share your information with Schufa, a credit rating agency, which will negatively impact your creditworthiness.

How is income from private loans taxed in Germany?

If you receive interest from the loan you lend to someone else, you must pay tax on this income. It’s treated as an income from the capital gains.

You must enter the income from the loan in the KAP appendix of the income tax return (Section 20 Paragraph 1 Nos . 5 and 7 EStG). 

NOTE: It doesn’t matter whether you lend the money to friends or to strangers via a portal. You must declare the income from lending the money and pay tax.

You pay a flat 25% capital gains tax on the interest plus a 5.5% solidarity surcharge. Church members also pay church tax. 

You can learn tips on how to save taxes in Germany in our guide on tax-deductible expenses. 

Can you deduct personal loan interest from taxes?

No, you cannot deduct the personal loan interest from taxes as you took it for personal reasons.