How do loans work in Germany?

A new car, your dream kitchen, or that long-awaited honeymoon—there are quite a few things worth spending money on. But with big, lifelong goals comes an even bigger price tag—which can be hard to finance out of pocket. If that’s the case, it might be worth considering taking out a loan. But how do you apply for a loan in Germany? Perhaps you’ve already started the research, or maybe you’re overwhelmed by terms like ‘Schufa credit report,’ ‘creditworthiness,’ or ‘collateral’. No stress. In this guide, we’ll explain how to apply for a loan in Germany, what you need to know about the application process, and how to adjust your loan later on—all in plain English. Ready? Let’s jump right in.

In basic terms, a loan is the sum of money that you borrow from a financial institution—like a bank, for example—that you pay back later with interest. In Germany, there are two main types of loans—an overdraft credit or a consumer credit. So what’s the difference?

If you successfully apply for an overdraft, it simply means that you can continue to overdraw your bank account after you’ve reached €0—up to the limit you agreed upon. You’ll be charged an interest rate on the amount that you’ve overdrawn. For example, with N26 Overdraft, you’d be charged an annual interest rate of 8.9% above the ECB rate. This type of loan could be the right choice if you need a small loan, or simply notice that you’ve gone slightly over your budget at the end of the month.  

However, if you’re interested in a larger loan, a consumer credit might be a better fit. Here, your bank lends you a certain amount of money for immediate use, so you can finance your travel plans, further education, or a new car. Since you’re borrowing money from the bank, you’ll have to pay back the full amount plus amortization and interest rates. The interest rate depends on the amount and repayment plan you choose. At N26, for instance, we offer an effective interest rate from 2.99% p.a. and lent terms of six to 60 months. 

Banking basics

Banking jargon can be confusing—but it doesn't have to be. Find simple explanations to popular banking terms.

Learn the basics

The good news is that you don’t need to hand in thousands of documents at your bank (at least not, if you choose a digital bank). Basically, you must prove sufficient creditworthiness, which will be assessed by your bank before the loan can be granted. 

• Legal age 

Need some extra cash for your sweet 16 birthday bash? We’re sorry to report that you’ll have to wait a little longer. To become eligible for a loan, you must be at least 18 years old. 

• Place of residence and German bank account

If you want to request a loan from a bank in Germany, you should be registered in Germany and hold a German bank account. 

• Regular income

Obtaining a loan is harder if you can’t prove a steady income. This might be the case for students or freelancers. 

• Creditworthiness

Your creditworthiness will be checked by your bank. The type of information they request will vary, but it may include your payment history, profession, or any properties you might own. German banks will also request information from Schufa, the German general credit protection agency. Afterwards, the bank will create an internal ranking to assess your creditworthiness. 

On top of these basic requirements, banks might request additional loan securities. This usually is the case if you’re considered a risk according to your credit ranking. Loan securities can be obtained through a co-signer—someone who agrees to back you if you default on your loan. Banks can request other securitiessecretaries, such as your life insurance. 

Whether or not you’re able to increase your loan amount really depends on the lender. You can either request an increase directly from your bank, or opt for debt consolidation with a different provider. In case of the latter, your current loan will be consolidated into a new one, which includes the old and new amount in one lump sum. This might be especially interesting if you have several active loans and want to simplify your payments or reduce your interest rate. 

Fell into some extra cash and want to put it toward your debt? That’s a great idea! However, whether you’re actually able to pay a loan off early depends on the terms and conditions agreed upon with the lender. Some contracts include fees for early repayment, for example, so you’ll need to review your contract to see how much of the loan you can pay off at once without incurring extra charges. 

The bank you'll love

✓ 100% mobile ✓ No hidden fees ✓ No paperwork ✓ Free virtual Mastercard ✓ Free ATM withdrawals

Get started (new tab)

Want to avoid mountains of paperwork and hours of waiting? Open a 100% mobile bank account in minutes and discover N26 Credit! At N26, you can request a loan of €1,000 up to €25,000 directly in your N26 app and make your dreams come true. That’s banking you’ll actually love!