You do not always have to take out a loan from a bank, you can also obtain it from private individuals. But a personal loan has its own rules, whether you borrow money from friends or get it from a group of anonymous lenders.

What are the advantages of a personal loan from friends or family?

A loan from a friend has several advantages: you can make the contract easier and more casual than a bank does. Your family or friends will not obtain any information about you from the credit agency Schufa. Also with regard to interest, relatives and acquaintances may often demand less than banks.

It looks similar with the granting of credit: Private individuals do not have to comply with the legal requirements for granting loans that apply to banks. For example, the question is what information banks have to obtain about the borrower and how they have to check the borrower’s creditworthiness.

While a financial institution checks the borrower’s creditworthiness by default, for example by showing salary statements and obtaining information from a credit bureau, relatives or friends are concerned with trust. The fact that you have to submit documents to them is rather the exception. In addition, a personal loan is not registered with the Schufa.

Collateral is also generally not required for private loans. In the case of bank loans, on the other hand, you often have to agree to the assignment of your income or, in the case of car loans, hand in your vehicle registration certificate.

What are the disadvantages of personal loans?

If you want to borrow money from people in your private environment, you should consider a few points. If, for example, there is a dispute between you and the lender, you do not have the option of contacting consumer protection organisations or a banking ombudsman.

You can conclude a credit agreement with a friend or relative orally. After all, there is no legal requirement for this type of credit. However, we strongly recommend the written version.

So, even with a personal loan, draw up a credit agreement and sign it with both parties. Finanztip offers you a model contract for this. In this way you create clarity and have something in hand in the event of any disputes. You do not need a lawyer or notary for this.

In addition, set a term for the private loan. Without an agreed period, your lender can cancel the loan at any time with three months’ notice. In this case, you would have to repay the entire amount in one fell swoop. If you do not want to be dependent solely on the good will of the lender, you should also record the duration of the contract in writing and attach it to your documents.

Remember: With a bank loan, there are usually no personal relationships between the lender and the borrower at stake. Some friendships, on the other hand, have already been broken by money disputes.

Can personal loans also be concluded via credit portals?

If you want to borrow money privately, the money does not have to come from your circle of acquaintances; you do not even need to know the private lender. There are companies that broker loans from private lenders: Auxmoney and Giromatch.

In such cases, personal loans work like classic installment loans from a bank: you submit an application and, after examining your documents, you receive a loan, which you then have to repay with interest. However, the money does not come from a bank, but from private individuals who want to invest their money in these loans and earn money through interest.

Giromatch has its own personal loan, but also passes the customer on to partners such as banks, brokers or Auxmoney if its own product does not suit the customer.

Auxmoney is a pure broker of personal loans. This provider is also integrated into the credit portals Verivox, Check24, Finanzcheck and Smava.

Smava had its own personal loans on offer until 1 July 2019, but now only brokers loans from Auxmoney. There will be no changes to the current loans.

The providers of these personal loans will not be able to do entirely without a bank; after all, the granting of loans in Germany is regulated by law. Companies, for example, need an official permit. The providers of personal loans therefore work in the background with banks.

This is how the application for a personal loan works

Applying for a personal loan via an online portal is similar to applying for other loans. You enter your data either on a credit comparison portal or directly with the provider. Data includes address, salary, employment and insurance. This data is used to determine your creditworthiness and thus also the interest rate that you have to pay for the loan.

According to the providers, personal loans should be suitable for borrowers who have little chance of taking out a loan with a normal bank. However, there are limits here as well: The borrowers must not only be of legal age and live in Germany, their creditworthiness also plays a role. If they have ever not repaid a loan, if they were insolvent or if there is an affidavit, providers of personal loans also reject these customers.

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