Taking out a foreign loan - possible even without a good credit rating
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WHAT IS A FOREIGN LOAN?
A foreign loan can be a loan without a credit check or a foreign currency loan.
With a loan from abroad - also known colloquially as a "Swiss loan" regardless of location - you get your money paid out as an installment loan in euros. The associated bank is usually based in Switzerland, but sometimes also in Liechtenstein or Austria, for example. An important feature is that banks from Switzerland or Liechtenstein do not have access to your credit rating. This means that you can get a loan even if you have a medium or low credit rating. However, in order to receive a positive loan approval, you must be able to provide other collateral such as regular salary receipts or property ownership.
With a foreign currency loan, you receive your money in a foreign currency such as Swiss francs or Japanese yen. In this case, you normally only have to repay your loan debt at the end of the term - it is therefore usually a so-called bullet loan. The risk here is that exchange rate fluctuations can lead to inflation. However, your loan can also become more favorable if the exchange rate develops positively.
In the case of foreign loans, the loan amount is usually limited to a maximum of €7,500 and in many cases must be repaid within a maximum of 40 months. The loan amounts for foreign currency loans are often significantly higher.
WHAT REQUIREMENTS DO I HAVE TO FULFILL?
As an applicant for a foreign loan, you must:
be of legal age,
have your place of residence in Germany and
have a regular income of a sufficient amount, depending on the loan amount.
Your employment relationship should have existed for some time - the following additional points will also be taken into account:
Current tax class
Number of dependent children
HOW HIGH ARE THE INTEREST AND FEES?
As the interest rates for foreign loans always depend on the interest rate policy of the respective country, the percentage rates also differ. This can be an advantage, but also a disadvantage - always enquire in advance about the interest rates and all additional fees in the destination country of your foreign loan.
Tip: Also pay attention to processing fees charged by intermediary providers. They are often unable to provide you with a commitment, but still charge dearly for their services. For example for:
Organizational matters
Consulting
Mediation
With reputable direct providers, you can often choose from three options and are immediately shown what interest and monthly installments you can expect.
IS THERE A CREDIT CHECK?
If providers advertise that they do not carry out credit checks, you should check carefully whether they are reputable companies. If high advance payments are required for notary costs or other fees, this indicates a dubious provider. If no credit check is carried out, both parties are also taking a higher risk.
However, there are also understandable reasons why companies offer foreign loans without a credit check. For example, if you can offer a property or high financial assets as collateral, there is nothing to be said against a loan without a credit check. In some countries, banks simply have different lending standards and attach less importance to your creditworthiness.
It is important that you check the reliability of your chosen provider.
HOW DO I RECOGNIZE REPUTABLE PROVIDERS?
You have various options for recognizing a reputable provider of foreign loans. Here are 7 simple points you can look out for:
Company check: Check on a suitable platform whether desired lenders are registered and therefore regulated in the respective country of origin - for example on finanz.at.
Customer reviews: Pay attention to customer reviews. These can quickly tell you more about a company's business practices.
Transparency: The conditions and fees should be clearly visible with reputable lenders. If you can't find any transparent information, you should be suspicious.
Advance payments: If upfront payments such as arrangement fees or other processing fees are required before you even get your loan, this is often a sign of fraud.
Customer service: Reputable providers generally have good customer service, are easy to contact and appear competent.
Contract: The contract for your foreign loan should be easy to understand and contain all the important information. If you have the feeling that something is missing or if the contract looks unprofessional, you should be careful.
Personal data: If credit providers ask for personal data that has nothing to do with your loan, you should be suspicious.
FOR WHOM DOES A FOREIGN LOAN MAKE SENSE?
An international loan may be suitable for you if you belong to the following professional groups, for example:
Real estate investor:in: If you want to buy a property abroad, it can be an advantage to be able to obtain more favorable financing in that country.
Freelancer:in: If you work online from abroad, a foreign loan in countries with a low cost of living may be more favorable for you.
Scientist or researcher: In this field, it is often necessary to work in different countries for limited periods of time. Depending on the country, an international loan may be more favorable for you.
Creative: A foreign loan can be used in this area, for example, to finance vernissages or exhibitions.
Important: Always compare individually whether a foreign loan is the best option for your situation.
ADVANTAGES AND DISADVANTAGES OF A FOREIGN LOAN
Whether an international loan is an advantage or disadvantage for you always depends on your personal situation. We have compared the most important advantages and disadvantages for you:
ADVANTAGES | DISADVANTAGES |
|---|---|
You may get more favorable conditions than in your home country. | Currency risks due to exchange rate fluctuations that may affect the repayment amount |
Access to different financial products than in the home country | Communication barriers due to differences in language or culture |
The currency risk for companies can be diversified, i.e. spread across different currencies. | Different or unclear legal framework conditions |
Alternative in case of rejection by bank in home country | Possible higher fees due to international transactions |
Potentially greater anonymity and data protection due to possibly stricter data protection laws | More difficult access to customer service - also due to possible time differences |
Potential for greater efficiency when investing in real estate | Tax differences that need to be taken into account |
The loan does not appear in the Schufa. | In many cases, foreign loans are earmarked for a specific purpose. |
Weigh up carefully whether an international loan really makes sense for you before you take it out.
HOW DO I PROCESS A FOREIGN LOAN?
After researching and selecting a provider, the process usually follows the same pattern:
You make contact with selected lenders and receive initial information about the loan application process.
In addition to a loan application, in most cases you will be sent a list of required documents that you must provide to potential lenders. These can be an identity card, proof of income, bank statements or other documents. Some providers require your documents to be notarized.
You fill out the loan application, check everything for completeness and send it back.
Your documents are then checked and your creditworthiness is assessed. This process can take different lengths of time depending on the provider.
If you are approved, your loan agreement will now be signed. Check the conditions again, read everything carefully and return the signed contract.
After signing, your loan will be paid out in full or in parts, depending on the agreement. The duration until payout varies depending on the provider.
Depending on the agreement, repayment is made in monthly installments or at the end of the term - pay attention to the agreed conditions.
OTHER TYPES OF CREDIT AND OTHER ALTERNATIVES
If a foreign loan is not an option for you, there are also alternatives:
Pawn loan: As you are using collateral, your credit rating is irrelevant. You also get your money paid out immediately in cash or by bank transfer without having to wait.
Personal loan: With personal loans, it is possible to borrow money without a credit check.
Advance salary payment: If you are in an employment relationship, it is possible in many companies to receive an advance salary payment. This can either be paid back with expected bonuses, vacation pay, planned overtime or in installments.
Loan from friends or family: Asking friends or family for money is often a hurdle, but if they agree, you usually get an interest-free loan and are more flexible in repaying it.
QUESTIONS AND ANSWERS
How can I improve my credit rating?
To improve your credit rating, you should take care to avoid negative entries in your Schufa score. You can check your current status several times a year free of charge. This gives you an overview of your current situation.
The following points can lead to a lower rating:
Constant change of current account
Many different credit cards
Current overdraft facilities
Invoices not paid on time
Outdated or incorrect data that has never been removed
Installment purchases - even with zero percent financing
Of course, it is advisable to reduce debts as much as possible and avoid installment payments as often as possible.
How do negative Schufa entries arise?
Negative Schufa entries arise, for example, when bills are not paid, the account is constantly overdrawn and perhaps even bank overdrafts occur or when loan installments are not repaid.
Can I also take out a pawn loan online?
Yes, with providers like CASHY you can have over 60,000 collateral items valued online. You can find out straight away how much money you can borrow for which item and what fees apply.